Gold Standard

bushi

...all is great, but what is the impact of these inflationary policies on people incomes, savings? On the capital amassed by real PRODUCTIVE eforts? On the purchasing power of currencies? Incomes are always playing catch-up with inflation (and never actually catching up fully and ESPECIALLY during the bust times, when jobs are scarce, and competition in the job market fierce), much less so - the value of hard-earned savings, which have no chance at all to catch up on it.

If someone is printing money in his basement, it is recognized as an act of counterfeiting, and severely punishable by law. If the same is done by Central Banks, it is all of a sudden OK. I am asking, what is the real difference? The effect on the economy is exactly the same, the only difference is, one happens with government blessing and under their "control" (hint: NOT), the other is not. But it all happens to a real loss for all of us (and to benefit of a very few). Oh, I am sorry, there's another difference: when counterfeited money gets into the economy, it just increases the money supply (until withdrawn from the circulation). When CBs are printing money, then they are LENDING it to someone afterwards, so they not only dilute the currency, but are also increasing the total burden of the debt in the economy. So we are getting hit twice.

I'd go with counterfeiters if I could choose, thank you very much.

antiskeptic

bushi wrote: »

If someone is printing money in his basement, it is recognized as an act of counterfeiting, and severely punishable by law.

The hand that rocks the cradle clearly isn't interested in co-parenting

If you took a glass-half-empty view of human nature and held that people are people first and bankers / politicians / business people second, then you could see why those in a position to do as people seem ever-bent on doing would avoid a gold standard like the plague.

SupaNova

andrew wrote: »

It doesn't matter what caused the Asian crisis; we're talking about whether monetary policy is an effective policy response to a shock or not, whatever the underlying source of that shock.

Obviously it's impossible to nail causation 100% in a social science, but there are solid theoretical reasons underpinning Auz and NZ's monetary policy success, and so you can't really dismiss that result just because there's no control for the Auz and NZ example.

I'm not dismissing the NZ example, I am saying the New Zealand example isn't enough to come to a conclusion. Just like some made the mistake of concluding because there was deflation during the Great Depression and some other recessions all deflation is bad. Or how some incorrectly concluded expansionary policy is the solution to recessions because, those who left the gold standard recovered from the Great Depression sooner.

And yes you are correct when you say its impossible to nail causation 100% in a social science, particularly a science like economics when nothing is ever the same, and there is no hope of ever controlling variables in a test tube like environment as is possible with hard sciences. That was Mises's point and why he emphasized, the trial and error collect the data approach to furthering our understanding of economic phenomena is futile.

bushi

antiskeptic wrote: »

The hand that rocks the cradle clearly isn't interested in co-parenting

If you took a glass-half-empty view of human nature and held that people are people first and bankers / politicians / business people second, then you could see why those in a position to do as people seem ever-bent on doing would avoid a gold standard like the plague.

Oh yes I am very well aware of this! This power won't be given away, this power has to be TAKEN away from them, by the people, and their democratic representatives, the governments - if we ever want to have a system that is a)much more stable in the peace-time (well in a war time everything goes to hell anyway...) b)just JUST, and MORAL, in the first place, c)avoid the inevitable global economic collapse, when (not IF) the assumed and required exponential economic growth, cannot be further sustained, for whatever reason, on a planet, that can only feed/house so many of us, and where each of us can only consume so much, to feed the further economic growth.

We live in a physically constrained world, but our current economic/monetary system requires infinite growth, to keep functioning - when the growth is for whatever reason stopped, the whole system starts collapsing (debts cannot be serviced, globally, when there is no growth, and since DEBT IS MONEY today, so systems start to fold, and it spirals out of control - as we can observe clearly since 2007). And it is BY DESIGN, that is an inherent design flaw. Namely, borrowing each and every single unit of money into existence (bar minted coins), as an interest-bearing debt. If you think about it for a moment, how could interest be EVER repaid - it was never created, in the first place, only the capital was. So the amount of debt (that has to be serviced - by sucking money out of productive economy) is ever increasing, and again - exponentially. Only, ever so slightly faster, than the economy can grow (why? - well, for economy to grow, someone, somewhere, has to borrow some more money into existence, again, on the interest - thus the economy (globally) can never catch up with the ever increasing Tyrranosaurus Debt)

And make no mistake, when we talk about Central Banks "printing", or doing QEs or other LTROs, they are actually still lending money to all this cash-junkies around, ie governments, and TBTF banks. Right, the solution for too much toxic debt in the system, is "take on some more debt, this time it is nearly interest-free". Nearly.

That same flaw, that "by coincidence", have benefited immensely the ones who have put it in place (the bankers, and specifically, Central Bankers), and that have economically enslaved the rest of us.

It is quite astonishing to me to see how people, who are supposedly interested in economics, never quite seemed to be asking all of these fundamental questions - rather assume that current system was given to us by some kind of a God, that it is unquestionable, that it has to be worshiped and rationalized - rather than questioned and vindicated - when it clearly fails, time and again, and it doesn't even pass the common sense test (remember the quote: "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist" --Kenneth Boulding). And then some of them will call you "ignorant", for refusing to speak their language, and focusing on the bigger picture instead. Sad.

regards,

happyman81

SupaNova wrote: »

andrew wrote: »

It doesn't matter what caused the Asian crisis; we're talking about whether monetary policy is an effective policy response to a shock or not, whatever the underlying source of that shock.

Obviously it's impossible to nail causation 100% in a social science, but there are solid theoretical reasons underpinning Auz and NZ's monetary policy success, and so you can't really dismiss that result just because there's no control for the Auz and NZ example.

I'm not dismissing the NZ example, I am saying the New Zealand example isn't enough to come to a conclusion. Just like some made the mistake of concluding because there was deflation during the Great Depression and some other recessions all deflation is bad. Or how some incorrectly concluded expansionary policy is the solution to recessions because, those who left the gold standard recovered from the Great Depression sooner.

And yes you are correct when you say its impossible to nail causation 100% in a social science, particularly a science like economics when nothing is ever the same, and there is no hope of ever controlling variables in a test tube like environment as is possible with hard sciences. That was Mises's point and why he emphasized, the trial and error collect the data approach to furthering our understanding of economic phenomena is futile.

I think futile is too strong a word. I can see his point, and perhaps you misquoted him, but there is some merit to the statistical approach, especially given that datasets are better now than in his day (practically non existent, in fact), and technology always improves making analysis easier. Certain fields of economics are very much benefitting from these advances, in particular microeconomic fields governing human behaviour. Others, not so much. Basically, this mistaken belief only occurs in the minds of those who see Economics as a homogenous discipline. When it isn't.

SupaNova

happyman81 wrote: »

I think futile is too strong a word. I can see his point, and perhaps you misquoted him, but there is some merit to the statistical approach, especially given that datasets are better now than in his day (practically non existent, in fact), and technology always improves making analysis easier. Certain fields of economics are very much benefitting from these advances, in particular microeconomic fields governing human behaviour. Others, not so much. Basically, this mistaken belief only occurs in the minds of those who see Economics as a homogenous discipline. When it isn't.

For Mises I'm not misrepresenting him, for the breadth of views in the Austrian School, yes futile would be too strong a word. Mises though dedicated quite a bit of time to writing about his approach to the economics, and how economics differed from other sciences. His books Theory and History and The Ultimate Foundation of Economic Science specifically deal with this.

happyman81

SupaNova wrote: »

happyman81 wrote: »

I think futile is too strong a word. I can see his point, and perhaps you misquoted him, but there is some merit to the statistical approach, especially given that datasets are better now than in his day (practically non existent, in fact), and technology always improves making analysis easier. Certain fields of economics are very much benefitting from these advances, in particular microeconomic fields governing human behaviour. Others, not so much. Basically, this mistaken belief only occurs in the minds of those who see Economics as a homogenous discipline. When it isn't.

For Mises I'm not misrepresenting him, for the breadth of views in the Austrian School, yes futile would be too strong a word. Mises though dedicated quite a bit of time to writing about his approach to the economics, and how economics differed from other sciences. His books Theory and History and The Ultimate Foundation of Economic Science specifically deal with this.

I know that economics cannot be the same as physics, but that doesn't mean it is a futile pursuit. Half an eye is better than no eye. It really depends on the field though, simply talking about economics as a homogenous discipline, now that is futile.

SupaNova

I can't paraphrase Mises here but he builds a very strong argument in the course of his writings, and then personally I am not as stubborn as Mises on this point. But seeing just how shoddy and crap some of the conclusions made by economists of this approach are, and how crap the approach of some very qualified economists is, means I am not too far off his stubborn position.

happyman81

SupaNova wrote: »

I can't paraphrase Mises here but he builds a very strong argument in the course of his writings, and then personally I am not as stubborn as Mises on this point. But seeing just how shoddy and crap some of the conclusions made by economists of this approach are, and how crap the approach of some very qualified economists is, means I am not too far off his stubborn position.

Again, it's the generalising that I can't stomach, and can't take seriously. I really don't know what economist means here, or who you are referring to. Are these health economists? Behavioural economists? Economic historians? Or, like this generalised argument usually goes, are you referring to the narrow band of macroeconomists who focus on economic forecasting, like those in the ESRI, etc? The type of economist that the general populace assume that all economists are, when in fact they are a minority?

SupaNova

I'll try give a specific example if that helps.

Scott Sumner who has a Phd in economics from University of Chicago and advocates a flawed policy of GDP targeting to replace the flawed policy of inflation targeting. Give him whatever special title you wish but here is a reply to his attempt(lets just hope he wasn't feeling well that day) at dismissing the Austrian theory of the Great Depression:
http://mises.org/daily/5826

happyman81

SupaNova wrote: »

I'll try give a specific example if that helps.

Scott Sumner who has a Phd in economics from University of Chicago and advocates a flawed policy of GDP targeting to replace the flawed policy of inflation targeting. Give him whatever special title you wish but here is a reply to his attempt(lets just hope he wasn't feeling well that day) at dismissing the Austrian theory of the Great Depression:
http://mises.org/daily/5826

What do you mean by special title? I don't get the impression that you appreicate the difference between Scott Sumner and an economist who never considers inflation, GDP or any other macroeconomic variable in his day to day life. If that is the case, then there probably isn't much point in extending this tangent, as I am talking about what economics is, and you are talking about what you think it is. Futile would be an apt word here.

SupaNova

happyman81 wrote: »

What do you mean by special title? I don't get the impression that you appreicate the difference between Scott Sumner and an economist who never considers inflation, GDP or any other macroeconomic variable in his day to day life. If that is the case, then there probably isn't much point in extending this tangent, as I am talking about what economics is, and you are talking about what you think it is. Futile would be an apt word here.

Chicago Macro-economist whatever you want, although I don't have a favorable view of someone modelling how to sell a license(who never considers macroeconomic variables in day to day life) which was given as an example of how modelling could be useful in another thread.

happyman81

SupaNova wrote: »

happyman81 wrote: »

What do you mean by special title? I don't get the impression that you appreicate the difference between Scott Sumner and an economist who never considers inflation, GDP or any other macroeconomic variable in his day to day life. If that is the case, then there probably isn't much point in extending this tangent, as I am talking about what economics is, and you are talking about what you think it is. Futile would be an apt word here.

Chicago Macro-economist whatever you want, although I don't have a favorable view of someone modelling how to sell a license(who never considers macroeconomic variables in day to day life) which was given as an example of how modelling could be useful in another thread.

I'm still not convinced that you appreciate the difference (I personally couldn't give a **** about that Chicago/Austrian nonsense), or that our discussion is adding anything useful. I'm going to leave it there.

antiskeptic

bushi wrote: »

This power won't be given away, this power has to be TAKEN away from them, by the people, and their democratic representatives, the governments - if we ever want to have a system that is a)much more stable in the peace-time (well in a war time everything goes to hell anyway...) b)just JUST, and MORAL, in the first place, c)avoid the inevitable global economic collapse, when (not IF) the assumed and required exponential economic growth, cannot be further sustained, for whatever reason, on a planet, that can only feed/house so many of us, and where each of us can only consume so much, to feed the further economic growth.

My glass-half-empty view of human nature doesn't accommodate the notion that mankind is able to organize himself unto a just and moral system.

We live in a physically constrained world, but our current economic/monetary system requires infinite growth, to keep functioning - when the growth is for whatever reason stopped, the whole system starts collapsing (debts cannot be serviced, globally, when there is no growth, and since DEBT IS MONEY today, so systems start to fold, and it spirals out of control - as we can observe clearly since 2007).

It doesn't matter what system you employ really, the population will eventually consume it's resources and disappear. All the current system does is press the foot to the floor and head for the cliff edge as fast as is humanly possible...

Indeed, I imagine we're already off the cliff edge and past the point of no return.

I mean, quite how you extinguish the consumptive desire of the 2 billion wannabees in China and India now that the blue touchpaper has been lit.. I don't quite know.

Interesting times ahead.

And it is BY DESIGN, that is an inherent design flaw.

It's not a flaw if it serves some peoples purposes. Flaws, like beauty, lie in the eye of the beholder.

Namely, borrowing each and every single unit of money into existence (bar minted coins), as an interest-bearing debt. If you think about it for a moment, how could interest be EVER repaid - it was never created, in the first place, only the capital was. So the amount of debt (that has to be serviced - by sucking money out of productive economy) is ever increasing, and again - exponentially. Only, ever so slightly faster, than the economy can grow (why? - well, for economy to grow, someone, somewhere, has to borrow some more money into existence, again, on the interest - thus the economy (globally) can never catch up with the ever increasing Tyrranosaurus Debt)

I'm reminded of running down a slope in the Phoenix Park as a little boy with my little legs going faster and faster...

And make no mistake, when we talk about Central Banks "printing", or doing QEs or other LTROs, they are actually still lending money to all this cash-junkies around, ie governments, and TBTF banks. Right, the solution for too much toxic debt in the system, is "take on some more debt, this time it is nearly interest-free". Nearly.

All, ultimately, to feed the ultimate cash junkies - us. We're addicted to 'growth' and don't countenance governments who threaten to take the needle out of our arms.

That same flaw, that "by coincidence", have benefited immensely the ones who have put it in place (the bankers, and specifically, Central Bankers), and that have economically enslaved the rest of us.

Enslaved in a quite (diabolically) brilliant way though - keep the populace grazing away on cheap goods and you won't ever have the likes of an Arab Spring.

It is quite astonishing to me to see how people, who are supposedly interested in economics, never quite seemed to be asking all of these fundamental questions - rather assume that current system was given to us by some kind of a God, that it is unquestionable, that it has to be worshiped and rationalized - rather than questioned and vindicated - when it clearly fails, time and again, and it doesn't even pass the common sense test (remember the quote: "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist" --Kenneth Boulding). And then some of them will call you "ignorant", for refusing to speak their language, and focusing on the bigger picture instead. Sad.

As I say, a finite world ensures the whole show will come to an end anyway, how you get there is a secondary consideration.

To be honest, I don't see that mankind is doing anything now that he hasn't always done. It's just that now the means by which his unchanging nature can wreak havoc have allowed the rate of change of damage-doing to go exponential.

bushi

I appreciate your stance, antiskeptic - and your fatalistic sense of humor, mixed with 100% valid points

However, one could argue, that:

a) fiat monetary systems, perpetuating and REQUIRING exponential growth to sustain them and prevent them from collapsing, only further fuel the fire - and indeed, leave us all with NO CHOICE, but to keep pressing the accelerator, in the attempt to prevent them from collapsing (classic Ponzi scheme, that is - only fueled "infinitely", by money creation)

b) quite the opposite: monetary systems, that would be based on FINITE resources (land, gold, etc.), would most probably tend to constrain growth at SOME stage (after peak gold, for example), thus (in all probability) promoting some kind of a safe, natural slow-down, stabilization, and maybe some (more or less) self-imposed, economic sustainability (both in population growth, and resources depletion, etc. - if you can't afford another child, you'd most probably not conceive one. At least on average, that is what happens in western countries. I do not take into account countries where western modern medicine collided with natural and traditional social model - i.e. giving birth to as many children as possible, because when 80% of them never lived long enough to reach maturity, it WAS sustainable model there, however maybe cruel from our point of view. But I'd rather leave them to their measures).

We desperately need some BALANCE, as a civilization, yet one of the tenets, and corner stones of it (global monetary system), is all about de-balancing it, with ever-increasing growth speed, and ever-increasing debt. It obviously cannot go on forever, and everything seems to be pointing out, that we have just started a while ago banging our heads on the glass ceiling of physical constraints, on our civilization's further growth.

If this is the case, than we desperately need a monetary/banking system, that could survive WITHOUT the need of constant growth. It is not the current system.

andrew

bushi wrote: »

I appreciate your stance, antiskeptic - and your fatalistic sense of humor, mixed with 100% valid points

However, one could argue, that:

a) fiat monetary systems, perpetuating and REQUIRING exponential growth to sustain them and prevent them from collapsing, only further fuel the fire - and indeed, leave us all with NO CHOICE, but to keep pressing the accelerator, in the attempt to prevent them from collapsing (classic Ponzi scheme, that is - only fueled "infinitely", by money creation)

b) quite the opposite: monetary systems, that would be based on FINITE resources (land, gold, etc.), would most probably tend to constrain growth at SOME stage (after peak gold, for example), thus (in all probability) promoting some kind of a safe, natural slow-down, stabilization, and maybe some (more or less) self-imposed, economic sustainability (both in population growth, and resources depletion, etc. - if you can't afford another child, you'd most probably not conceive one. At least on average, that is what happens in western countries. I do not take into account countries where western modern medicine collided with natural and traditional social model - i.e. giving birth to as many children as possible, because when 80% of them never lived long enough to reach maturity, it WAS sustainable model there, however maybe cruel from our point of view. But I'd rather leave them to their measures).

We desperately need some BALANCE, as a civilization, yet one of the tenets, and corner stones of it (global monetary system), is all about de-balancing it, with ever-increasing growth speed, and ever-increasing debt. It obviously cannot go on forever, and everything seems to be pointing out, that we have just started a while ago banging our heads on the glass ceiling of physical constraints, on our civilization's further growth.

If this is the case, than we desperately need a monetary/banking system, that could survive WITHOUT the need of constant growth. It is not the current system.

As per the charted. This is a forum for serious economic theory discussion. It's not a vehicle for discussion of the pseudo economics, like that featured in the 'money as debt' videos. Do not post in this thread again. If you have any questions, PM me.