I was wandering throughout the blogosphere and came across a blog post from J.F. Catalán where he comments on a point raised by Daniel Kuehn about inflation being theft (in commenting on an article from the Atlantic). Daniel's pertinent comment first:
"Banks and bondholders get cheated, because their loans are repaid with inflated coin. Similarly, people with fixed savings, such as retirees, get punished for their thrift. President Grover Cleveland, a warrior against inflation (in his day, brought about by cheap silver), rightly likened a debasement of the currency to theft." This is an irresponsible set of sentences. Nobody has property rights associated with a stable value of money. [Emphasis mine] Everyone makes transactions with the understanding that the value of money changes - CERTAINLY banks and bondholders do. This is absolutely, unequivocally not "theft".
And Catalán's concurrence:
Exactly. Inflation ought to be judged based on its consequences. ... Austrians know that stabilizing the value of money is impossible. Targeting a price level does not accomplish a stable exchange value of money. The value of money is always in terms of other economic goods, and the value of money will constantly be changing: this is a function of changing preferences, expectations, and plans/actions. As long our economy is a money one characterized by the pricing process, then the value of money will always be shifting. If government-induced inflation is theft, then it is theft when someone affects prices in such a way that it reduces your purchasing power with regards to the relevant good. The moral argument against inflation is a bad one. Stick with the consequentialist one.
Am I misunderstanding the exchange here, or did I just completely waste my time reading Inflation Is Theft?
Clayton: ...and that the benefits accrue specifically through the printing of money which would not be possible in the absence of a monopoly on money.
...and that the benefits accrue specifically through the printing of money which would not be possible in the absence of a monopoly on money.
How is this apodictically true? This is exactly what I’m talking about: you assume that without legal tender no money which’s supply ever increased would achieve success in the market. How is that apodictically true?
Just suppose, for the purposes of the thread, that people turn out to prefer a currency which supply increases at a steady rate, if given the choice. Wouldn’t the issuer than benefit from the inflation it engineered? Would it be stealing?
Merlin:If we do not know how money ‘should behave’ (because only a free market can show us), we cannot say that money is currently behaving otherwise, especially not is a specific direction (claiming that money is simply not behaving as it should, could be true simply because the probability that we blindly found the optimal is very small). So, we should try to set up a system that lets money behave as it should, and not imply how money should behave (which is what arguing against inflation is). There, I simplified my post.
You may have summarized it, but it's more confusing than ever. You're going to have to explain what you mean by "money behaves".
ThatOldGuy:Hoppe's point is valid insofar as he writes, but you are the one that calls it theft.
Once again, if you would like to explain how "increasing one's wealth at another's expense" is not theft, I'd be interested to hear it.
@Merlin: Red herring. I'm not even making a "market versus state" argument, I'm simply pointing out that the government benefits from its money monopoly through money-printing and that this is apodictically true so long as it is true that humans are self-interested. Since the OP argument relies on the (unstated) assumption that government's actions on the money supply do not benefit itself, the argument is simply false.
As for why there would not be inflation of fiduciary media in a free market in the production of money and money substitutes (expansion of the money supply would, of course, occur), I can't believe I have to walk you through it step-by-step because you're very smart. If money producer A can produce a money substitute with some kind of built-in inflation then money producer B can produce a money substitute indentical in every way except without the built-in inflation, thus reducing the use cost of B-money to customers vis-a-vis A-money. This is the nature of any market efficiency argument.
Clayton -
John James,
I was careful to examine that claim, and did so, in that post. Theft is the aggressive seizure of physical property; while inflation diminishes the monetary value of one's property, in terms of the inflated currency, no aggressive seizure of property has taken place by the act of inflation and inflation cannot therefore be called theft. I already explained how it is argumentatively unjustifiable, with support from HHH, that one can claim property rights in the value of a good.
If I had a cake and ate it, it can be concluded that I do not have it anymore. HHH
One major difference: commodity goods provide real value to people in society, fiat dollars provide no value. Fiat dollars can only serve as a money value but have no use value (besdies that of money).
If I create more of a good or service, then I have benefited society as a whole by adding to its wealth, although my competitor may be personally hurt.
If I create more money from my printing press and circulate it in society, I have provided absolutely no value to society yet have enriched myself in the process.
Stealing is taking private property by force. When I create another widget I am not taking private property by force - I simply provide another widget.
When I create an extra dollar from a printing press I create nothing of my own of use value to society. All I am doing, is taking by force a portion of the economy's pie that has real value and allocating it to me.
Since fiat money is special in that sense - that is has no use value - creating more of it for oneself is taking more of society's purchasing power for real goods and giving it to oneself.
The moral argument is sound.
But you're missing the point that printing pieces of paper and calling them "money" is not self-enriching unless you can also impose a monopoly in the production of money/money substitutes. The monopoly is the source of the evil. It is true that private banks will attempt to issue unbacked fiduciary media (money substitute inflation), especially in the absence of strong law against this type of fraud. Rothbard goes over this in depth in Mystery of Banking. But the fate of banks that choose to engage in this kind of fraud is no different than any other fraudsters: market ostracism and bankruptcy.
The moral argument is sound but the technical underpinnings of the moral argument also need to be valid and sound.
Just thought of a really good analogy:
The fiat dollar system we have is like having a fixed number of tickets at any given moment to a pile of goods/services. The tickets themselves do nothing except to provide the ability to purchase this pile of goods/services.
Each person has a certain amount of tickets at any given time. If someone, howwever, creates couterfeit tickets and takes the goods/services that belonged to the person who had real tickets, then it is theft.
I absolutely agree with you. My argument was not complete - it wasn't trying to be - I was just offering another valid point. If this system was totally voluntary, then it would be fine because then people could choose whether to hold the dollars or "tickets" in my analogy.
ThatOldGuy:Theft is the aggressive seizure of physical property
So if I transferred all of someone's bitcoins without their permission from their account to an account I own, that wouldn't be theft. Sweet.
I already explained how it is argumentatively unjustifiable, with support from HHH, that one can claim property rights in the value of a good.
Uh. You haven't explained how "increasing one's wealth at another's expense" is not theft though. So if you would, please.
J F Catalan missed the boat badly here.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
John James:You haven't explained how "increasing one's wealth at another's expense" is not theft though.
The definition of theft is the aggressive seizure of property*. Wealth is the sum of economic goods in one's possession; however, in the context of inflation, in which this discussion is framed, wealth is implicitly defined as the value of the sum of one's money. Since the value of a good is not objective, it cannot be theft to inflate the money supply as no property is seized; theft doesn't apply to the situation.
Ultimately, if you wish for theft to apply to the situation at hand, inflation, you must contend that one has property rights to the value of his goods, in this case the property rights to the value of his money, which I have already demonstrated is argumentatively unjustifiable. In the context of inflation, 'increasing one's wealth at another's expense' translates to "increasing the quantity of goods that one has, through the use of his own means (ink, paper, printing press, et cetera in this case) with the consequence, intended or not, of diminishing the value of the units of these goods held by others, ceteris paribus." This elaborated translation is different from one in which I gain at your expense by, say, involuntarily seizing your computer which would be an example of theft. *I explain my omission of the word 'physical' from this definition below.
John James: ThatOldGuy:Theft is the aggressive seizure of physical property So if I transferred all of someone's bitcoins without their permission from their account to an account I own, that wouldn't be theft. Sweet.
I use the word 'physical' in an attempt to emphasize that property has intersubjectively ascertainable, or objective, boundaries (I should have been clearer here and said as much; my mistake, thanks for catching it). Bitcoins are recognizable units of a means of exchange; if someone is capable of claiming that whatever quantity of bitcoins are his, and he has acquired them legitimately (i.e. through homesteading, production or voluntary exchange), then they are his property since they are intersubjectively ascertainable (i.e. Bill has 1 bitcoin) because a unit can be distinguished from another (this is so by the fact that you are capable of taking another's bitcoins, which means that you can recognize that they are part of his property). Of course, if you involuntarily take these from someone, it is theft.
ThatOldGuy:Wealth is the sum of economic goods in one's possession;
Please explain how one calculates this sum.
however, in the context of inflation, in which this discussion is framed, wealth is implicitly defined as the value of the sum of one's money.
False.
Clayton: If money producer A can produce a money substitute with some kind of built-in inflation then money producer B can produce a money substitute indentical in every way except without the built-in inflation, thus reducing the use cost of B-money to customers vis-a-vis A-money. This is the nature of any market efficiency argument. Clayton - Oh, so you assume that all producers will produce money substitutes, pyramiding on top of some base ‘hard’ money. I see no reason to take that for granted. A producer could just produce money pyramiding on top of nothing, just like the dollar. Would inflation in that case be theft? Would it be impossible? Clayton: Since the OP argument relies on the (unstated) assumption that government's actions on the money supply do not benefit itself, the argument is simply false. I feared as much, we are discussing different issues. Now, we all agreed right at the begging that legal tender was aggression. That is settled. What I am discussing now is whether on top of that, inflation itself is theft. So, does the state currently commit two crimes, or just one? If there were no legal tender laws, would inflation be theft? This is what I’m asking. What you argue is that the state benefits form the current monetary system. No need to debate there. But this argues that legal tender is theft, not that inflation itself is. The Regression theorem is a memetic equivalent of the Theory of Evolution. To say that the former precludes the free emergence of fiat currencies makes no more sense that to hold that the latter precludes the natural emergence of multicellular organisms. | Post Points: 20
If money producer A can produce a money substitute with some kind of built-in inflation then money producer B can produce a money substitute indentical in every way except without the built-in inflation, thus reducing the use cost of B-money to customers vis-a-vis A-money. This is the nature of any market efficiency argument.
Oh, so you assume that all producers will produce money substitutes, pyramiding on top of some base ‘hard’ money. I see no reason to take that for granted. A producer could just produce money pyramiding on top of nothing, just like the dollar. Would inflation in that case be theft? Would it be impossible?
Clayton: Since the OP argument relies on the (unstated) assumption that government's actions on the money supply do not benefit itself, the argument is simply false.
Since the OP argument relies on the (unstated) assumption that government's actions on the money supply do not benefit itself, the argument is simply false.
I feared as much, we are discussing different issues. Now, we all agreed right at the begging that legal tender was aggression. That is settled.
What I am discussing now is whether on top of that, inflation itself is theft. So, does the state currently commit two crimes, or just one? If there were no legal tender laws, would inflation be theft? This is what I’m asking.
What you argue is that the state benefits form the current monetary system. No need to debate there. But this argues that legal tender is theft, not that inflation itself is.
John James: You may have summarized it, but it's more confusing than ever. You're going to have to explain what you mean by "money behaves".
OK, let’s summarize it even more. Would inflation in a free (legal tender-less) monetary system be theft? If you say ‘no’, than this is all I’m arguing. If you say 'yes', do say more because I'd find that position very peculiar indeed.