Economics Questions

Re: why do people adamantly advocate for gold money yet

Stranger — Mon, 18 May 2009 21:06:56 GMT

nirgrahamUK:

you are right about my terminology. i meant what you said about guaranteed 100% demandably convertable.

I would hope all the libertarians would demand their fed notes in gold, and then since legal tender laws were repealed entrepeneurs could found their own bailment banks for the gold.

Yes but there is a risk of inflation. If the Fed resets its notes at a price much higher than the current market price of gold because it cannot cover every note with its actual gold reserves, then there exists an incentive to convert gold into dollar notes (by depositing gold at a bank or at the Fed) and thus inflate the money supply. This will not create a cycle because it is the mining industry that will be stimulated instead of the financial businesses, but it will create a rise in the price level.

The alternative is for the Fed to refuse all new gold deposits, but that would mean a fixed, zero-growth money supply.

Re: why do people adamantly advocate for gold money yet

David Z — Mon, 18 May 2009 19:38:52 GMT

scineram:

david_z:
Take away all of the money in the world, tomorrow, and we'd be no less wealthy.

This is simply nonsense. How the hell would then I get my hands on my consumption goods?

You're kidding, right? How do you think man was able to consume prior to money?

In the short- to medium-run, you'd probably have to give up something in exchange for whatever it is that you like to consume. Maybe you'd give up your labor in-kind, or maybe you'd give up something that you had previously bought (in a roundabout way, with your labor), etc. Over the long-run, I would expect some new medium of exchange to rise, in which you'd likely be paid wages, and with which you could buy whatever you could afford.

Re: why do people adamantly advocate for gold money yet

scineram — Mon, 18 May 2009 12:32:03 GMT

david_z:
Take away all of the money in the world, tomorrow, and we'd be no less wealthy.

This is simply nonsense. How the hell would then I get my hands on my consumption goods?

Re: why do people adamantly advocate for gold money yet

David Z — Sat, 16 May 2009 02:33:13 GMT

GilesStratton:
Huerta de Soto covers this is the last chapter of his treatise, you might want to check that out.

I'll have to pull that one off the shelf, errrr, out of the basement where it's been since I moved about a year ago. I was about 1/3 of the way through that book before it got boxed up and I started using power tools on the new house...

Re: why do people adamantly advocate for gold money yet

Jon Irenicus — Fri, 15 May 2009 14:24:40 GMT

OK, here's a question I will answer whether you ask it or not: how many annoying new posts does one need to post before they get banned? Well, you're coming pretty close to that. So either limit it, or I am banning you for a few days. You have questions, fine. Just keep them limited or consolidate them into a few single topics.

Re: why do people adamantly advocate for gold money yet

Thedesolateone — Fri, 15 May 2009 13:52:39 GMT

GilesStratton:
The problem is I've already got well over 20 books on my shelf I've not yet read.

Me too, although not all of them are top level stuff.

In the two orders I made from the Mises Store, I bought really random stuff - and afterwards I just wondered why.

My next order is well planned though - although I may have to wait until my birthday...

Re: why do people adamantly advocate for gold money yet

hayekianxyz — Fri, 15 May 2009 12:31:40 GMT

Thedesolateone:

GilesStratton:
Huerta de Soto covers this is the last chapter of his treatise, you might want to check that out.

On my wishlist

Rothbard said something about it in Mystery of Banking IIRC

I want to get it too actually, the new cover looks fantastic. The problem is I've already got well over 20 books on my shelf I've not yet read.

Funnily enough, I've read the book in its entirety once and many of the chapters again but I've always skipped the last chapter on this topic, otherwise I would have elaborated.

Re: why do people adamantly advocate for gold money yet

Thedesolateone — Fri, 15 May 2009 12:11:38 GMT

GilesStratton:
Huerta de Soto covers this is the last chapter of his treatise, you might want to check that out.

On my wishlist

Rothbard said something about it in Mystery of Banking IIRC

Re: why do people adamantly advocate for gold money yet

hayekianxyz — Fri, 15 May 2009 10:20:25 GMT

Thedesolateone:

david_z:
So a difference between a commodity-backed currency, and fiat paper, is that the commodity is stuff. Unbacked paper money is decorated toilet paper.

I know all this

What I'm really asking is: how do we make the transition nonocoercively, but so people don't lose out "unfairly"?

Huerta de Soto covers this is the last chapter of his treatise, you might want to check that out.

Re: why do people adamantly advocate for gold money yet

Thedesolateone — Fri, 15 May 2009 09:54:58 GMT

david_z:
So a difference between a commodity-backed currency, and fiat paper, is that the commodity is stuff. Unbacked paper money is decorated toilet paper.

I know all this

What I'm really asking is: how do we make the transition nonocoercively, but so people don't lose out "unfairly"?

Re: why do people adamantly advocate for gold money yet

David Z — Fri, 15 May 2009 04:17:05 GMT

Thedesolateone:

david_z:
Take away all of the money in the world, tomorrow, and we'd be no less wealthy.

But there would be a redistributive effect

I'm asking - is this fair?

No no no - I'm just saying that if all the bank deposits in the world evaporated overnight, we'd still have all of our stuff. And an abundance of stuff is what constitutes real wealth.

So a difference between a commodity-backed currency, and fiat paper, is that the commodity is stuff. Unbacked paper money is decorated toilet paper.

Re: why do people adamantly advocate for gold money yet

Thedesolateone — Thu, 14 May 2009 23:10:09 GMT

david_z:
Take away all of the money in the world, tomorrow, and we'd be no less wealthy.

But there would be a redistributive effect

I'm asking - is this fair?

Re: why do people adamantly advocate for gold money yet

nirgrahamUK — Thu, 14 May 2009 21:32:19 GMT

you are right about my terminology. i meant what you said about guaranteed 100% demandably convertable.

I would hope all the libertarians would demand their fed notes in gold, and then since legal tender laws were repealed entrepeneurs could found their own bailment banks for the gold.

Re: why do people adamantly advocate for gold money yet

David Z — Thu, 14 May 2009 21:25:14 GMT

"Peg" is probably the wrong word. Whatever they do, they'd have to make it 100% convertible, which is to say that every claim to a FRN dollar would be an aliquot claim to a certain weight of gold. What that weight is, I have no idea. Maybe it's 1g, maybe it's .0001g. Foreverafter, as long as the Fed abstained from inflating, they'd never need to worry about getting gold from anywhere, because their obligations would never exceed their reserves.

Re: why do people adamantly advocate for gold money yet

David Z — Thu, 14 May 2009 21:21:39 GMT

Juan:
That would be true only for people who have all their assets in cash ?

Agreed. The fact of the matter is that only a small fraction of the world's wealth consists of money. Most of the world's wealth consists of other assets - your iPod, basketball shoes, bicycle, herd of goats, lawnmower... All of these things are material wealth. Take away all of the money in the world, tomorrow, and we'd be no less wealthy.

Sure, there would be a short-term adjustment due to the illiquidity of most people's assets (i.e., your lawnmower isn't very marketable, probably) but we'd adjust, and we'd adjust pretty quickly, I think.