... then won't a recession result when private agents increase the money supply, too?
Say there's a gold standard in place; gold is money, and the supply of gold is the money supply. If there's random year to year fluctuations in gold production, or superior capitalist production allows an ever increasing production of gold, then won't the money supply expand eventually, lowering interest rates and so forth?
But it won't cause a recession, right, because it's "good money" when private banks issue it and "bad money" when the federal reserve issues it?
a) If it does cause business cycles, then too bad, that's life. There are also weather patterns, climate cycles, sunspot cycle and so on. There's a moral difference between cycles that occur as a result of voluntary interaction and cycles that occur as a result of telic intervention in the market. The former are amoral and the latter are immoral.
Oh, so in other words private banks can totally fuck up the economy with their voluntary money creation decisions and insider trading, but it's morally a-okay. It's a consistent position, and the only logical one you can take while still being an Austrolibertarian, but it's not going to make much sense outside of mises.org.
b) (I'm starting to feel like a broken-record here): Changes in the supply of money per se are not the cause of the business cycle. The cause of the business cycle is the discoordination of capital over time which is caused by the distortion of the (government bond) interest rate caused by market intervention of the Fed, where "intervention" here is virtually synonymous with rapid and unpredictable - yet inexorable - expansions of the money supply.
The increase in privately created money in the form of financial derivatives has also been pretty rapid and unpredictable. In fact the MBS market was once worth trillions and expanded much more rapidly than any official monetary aggregate during the 90s and 2000s. Gold, silver, other commodities- their extraction rate may only be slightly slower than typical M3 growth, but they move in and out of circulation very unpredictably. At least the Fed will announce monetary rules and discretionary policies from time to time to grant a heads-up.
It does and did. As I mentioned above, gold boom towns are an example of a kind of business cycle... a rapid influx of capital, often followed by a rapid abandonment. The difference between a gold rush and the Fed is that the former is localized to one market segment (gold production) and whatever locality is affected, while the latter affects the entire economy (though some portions are more affected than others) and is not local.
Increases in private gold circulation or vast expansion of financial derivatives are not local events. It's not clear that people would suddenly stop using digitally created private money simply because of deregulation and tax cuts.
As their customer, that's your concern, not mine. Gresham's Law operates in reverse in an unhampered market in money production. Good money drives out bad.
The problem is that banks and individuals are still so keen on using that "bad money". Gold is definetly not an example of good money if the amount in circulation at the moment is growing faster than the overall money supply. That might not have been so at different points in the past or future, but not right now.
And I might even convince you that bitcoins are not good money. They're terrible money.
man you are being hard headed. You keep bringing up a lot of the same things.
Pick a single topic and lets go with it. Whats your biggest problem? Gold as money? Gold mining? Gold supply as money? banking under a gold standard? banking practices? derivatives? interest rates? gov intervention? fiat money? bitcoins?
i still dont know why you think gold supply is growing faster than dollars? your article says there is an average of 2500 tons of gold produced every year. so thats about 140 billion dollars a year. Thats not in the US.... THATS THE WORLD'S ECONOMY. Your article also says 57% of gold goes into jewelry which leaves 60 billion in gold going into markets other than jewelry. Lets just assume 100% of the 60 billion would go into the money supply if we had a gold standard...Are you really suggesting that the WORLD is printing less than 60 billion dollars worth of notes a year????
The US national debt increases everyday by almost 4 billion...
I'm talking about the precent growth rate of the gold supply. Right now, it's the higher one.
Whats your biggest problem?
That I have to go to work tomorrow.
where is your proof? i pointed out that the growth of the gold supply with YOUR references is 60 billion dollars a year. Now present a world monetary supply growth rate that is smaller than 60 billion and you win. Until i can provide proof that refutes it.
That's... not a percent. Anyway, whatever, this is going back pages and pages.
Oh, so in other words private banks can totally fuck up the economy ... At least the Fed will announce monetary rules and discretionary policies from time to time to grant a heads-up.
You do realize that the Fed is a private bank, that is, it is a cartel of private banks? Please explain to me how the Fed is this super-transparent, super-accountable, super-democratic institution vis-a-vis those evil, mythical entities you keep calling "private banks"???
with their voluntary money creation decisions and insider trading, but it's morally a-okay.
People choose their heart and brain surgeons. I think they can also choose what banks to patronize.
It's a consistent position, and the only logical one you can take while still being an Austrolibertarian, but it's not going to make much sense outside of mises.org.
Do you see me travelling around the Internet trying to win friends and influence people?
You keep trying to imply there is some kind of similarity between the growth in the gold supply and the growth in fiat money supplies. There is no comparison whatsoever.
The problem is that banks and individuals are still so keen on using that "bad money"
*facepalm
Gold is definetly not an example of good money if the amount in circulation at the moment is growing faster than the overall money supply.
Are you familiar with the principle that both parties to a voluntary transaction simultaneously benefit from it?
Clayton -
Don't get me wrong, I believe the Fed is run by a Jew. But the fact that that it's a private bank makes it morally unethical to infringe upon its operations.
It would make a good book.
Unless gold tanks in five years when Peter Schiff goes out of fashion and you lose all your money. Anyway, my advice is to at least diversify. Platinum is actually reasonably priced.
Zimbabwe? Weimar Germany? What about Emperor Diocletian? You're really taking the comparison into left field.
Gold is a volatile asset. Fluctuations in gold circulation are probably at least as bad as any (non-obscure-third-world-country) currency.
Here's a test: if QE doesn't result in a huge hyperinflationary bash, won't that be kind of dissapointing for Austrian theory?
@als:
Allow me to quote one of the founders of the Federal Reserve: "Money is gold and nothing else." But I guess one of the founders of the Federal Reserve was just out of touch and not with it. What an old fuddy-duddy, monetary crank that JP Morgan was. He clearly had no idea what he was talking about. As Bugs Bunny would say, "What a nincompoop! What an ultra-maroon!"
I wouldn't say JP Morgan was a founder of the federal reserve. I assume you think he did something illegal because he owned a fractional reserve bank, but whether they're required 100% or 500% reserves doesn't prevent a private bank from expanding the money supply on its own as a lender of last resort.
I started this thread to point out that private agents are just as capable of increasing the money supply as "government" ones are, regardless of fractional reserve bans. Even supply side phenomena like historical gold rushes, like the California one, have been enough to affect the global economy. This expansion of the money supply should have caused a recession, but fortunately your theory is incorrect and they had no such effect.
There is no inherent problem with the fed itself. Its private it can print whatever the fuck it wants.
The shitty thing is, us government FORCES every fucking us citizen to use the fed money.
That is where the fucking problem lies. Within the governmnet.
Thats why Ron Paul always talks about competition in currency before abolishing the fed. Once you let gold compete with dollar, then the fed will abolish itself (piece of gold more valuable than paper shit money).
“Since people are concerned that ‘X’ will not be provided, ‘X’ will naturally be provided by those who are concerned by its absence.""The sweetest of minds can harbor the harshest of men.”
http://voluntaryistreader.wordpress.org
Not if the Fed inflates at less than 1.5% a year. Then it'll have the stronger money.
once again, how do you figure gold inflates over 1.5%? 60 billion a year is very small comparable to all the gold out there.
Lets just say the fed doesnt inflate. there will still be a gold to dollar ratio. What do you think people will choose when they could have 100 $ worth of gold? or a piece of paper with the number 100 on it? Explain why people would choose a piece of paper over a commodity?
I think there's like $1.8 trillion in gold out there.
People will chose whatever is scarcer, and if it's paper (and not being counterfeited), they might go for that. Of course the dollar would have to deflate a lot first, or maybe a different currency would have to be issued. But as long as it grows less than 1.5% a year it's a better bet.
Wont competition in currencies then make it so supply is stable? (if too much is printed then competitior will be worth more, and vice versa)
The supply of gold? Gold is a commodity. If more is mined it inflates the whole market.