Steve G.

Top issues

In Libertarian on July 23, 2008 at 9:07 pm

Perhaps you kind folks can help me out. What would you say are the top issues of the next 10 years or so, for both libertarians and regular citizens, and for the U.S. and the world?

On an unrelated “Peter Orvetti Is An Idiot” note — can anyone recommend good, easy-to-understand sources on libertarian monetary policy (i.e. gold standard) and why the Fed is bad?

  1. Once again, watch From Freedom to Fascism.

    I think the biggest problem is that the country is heading towards bankruptcy. Recent sources say Medicare will be out of money in about 10 years, even sooner with Universal.
    We’ll be broke, most likely in war, and our dollars will be used as kindling.

  2. The imminent collapse of the global financial system = 1-10.

  3. Look who wants all ten issues to himself…

  4. Peter – The book that opened my eyes is Ron Paul’s Gold, Peace, and Prosperity, and it’s available for free at the Mises Institute. It’s short and to the point.

    After that, you should read Murray Rothbard’s The Case Against the Fed, also available for free.

    I’m also told Rothbard’s What Has Government Done to Our Money is a good beginner’s guide, but I haven’t read that.

    I’d also recommend The Politically Incorrect Guide to Capitalism, which is about more than money, but it covers it.

    Also, if you can find something about Menger’s Theory on the Origin of Money. I found that to be vital to my understanding.

  5. Peter: My comment is awaiting moderation. Maybe you can still see it, though. I recommended some free ebooks from the Mises Institute.

  6. I suggest reading Economics for Real People, from the mises institute (or Amazon).

    That is good for general economic theory. If you want a good (and more advanced) view of monetary policy, you might want to try “The Case Against the Fed”, which is by Murry Rothbard.

    “Man Against the Welfare State” also makes a strong case for hard money.

    And I have to recommend “The Wealth of Nations” for die-hard readers, who will be able to read about what governments had to do to cause inflation in 1776 (yes — It was published in the same year as the Declaration of Independence). Back in *those* days, they had to literally melt down the gold coins and either debase the result (detectable) or recoin them smaller (detectable). That way, you could really recognize the source of inflation.

  7. Sorry, Mises Institute =

  8. Biggest issues:
    1. Stopping a global carbon tax.
    2. Stopping US foreign nation-building.

    Smallest issue:
    1. Robert Milnes

  9. I suggest a wide range on libertarian economics…if you want ideology, read Rothbard. If you want economics, read Friedman.

  10. If you want to learn about how the state can be more efficient, read Friedman. He’s an undisputed expert on that.

    That’s not a slight on Friedman who was anti-war and anti-drug war, but his monetary economics were horrible. That’s why he was able to cozy up with the GOP so much. Friedman was the original Beltway libertarian!

    Jeff – Friedman’s analysis of the Federal Reserve is completely wrong on the face of it. Monetary expansion is flat-out NOT distributed evenly. Everything that flows from that bad premise is also bad.

  11. GE

    As a writer here, I believe you can pull comments out of moderation

  12. Regulation is a growing issue that keeps grabbing my attention. Now that the public has been brainwashed into seeing regulation as the solution to problems that would be better handled by the free market or the courts, the government is constantly debating how to go about regulating areas of society that are impossible to regulate effectively. Now that regulation has become so intrusive on our personal decisions, while also controlled by lobbyists, an anti-regulation movement has the potential to become very powerful if we can pull the public out of the paradigm the Republicrats have created.

  13. 1. American imperial interventionist foreign policy
    2. Erosion of civil liberties and personal privacy

    I’ll think of more later.

  14. paulie – No, I can’t. You have a higher level clearance than I do if you can.

  15. The issue of the decade is whether Americans rube will wake up, smell the coffee, realize they are not living in a free country and do something about it. Of course, before that could happen the rubes would have to understand what it means to be free. Then they would have to grow some balls big enough to resist tyranny.

    My guess is that America will continue down the path it is currently on. The hideous truth is that the vast majority of rubes will vote for Obama or McCain, both of whom have a vested interest in continuing down the current path.

  16. Issues, eh?
    1. The war in Iraq and Afghanistan
    2. 250,000 U.S. troops abroad in 130 countries other than Iraq and Afghanistan on some 700, or so bases.
    3. The Drug War which is violating the civil liberties of Americans.
    4. $54 trillion in unfunded liabilites the future generations of Americans face.

    More later and do you want detailed analysis of each issue, or just the headlines?


  17. Issue 1: War – any foreign war should be ended. Foreign occupation of Japan, Germany, Korean peninsula should be ended.

    Issue 2: Monetary policy – the dollar is dissolving to its inherent value. It will lose status as the reserve currency for the world within a few years, I believe. A monetary policy restoring a gold standard is not a solution. A monetary policy going back to constitutional money, gold and silver coins, would be better. Much better still would be to remove the issue power of money from government, which has been absurdly bad at it for millennia. A free market monetary policy would leave it to individuals to accept what they please and to offer in tender what they wish. There’s no reason for governments to be issuers of money. Since they produce nothing of value, governments are actually a very poor choice for issuing money.

    Issue 3: Fiscal policy. I believe the government at all levels is bloated. Income taxes should be eliminated at all levels. Sales taxes should be eliminated at all levels. Property taxes should be cut. Every government program you can name should be eliminated to balance the budget and to reduce the impositions on the economy through regulatory madness.

    Issue 4: Trade policy. All the trade agreements should be scrapped and replaced with free trade – the absence of controls on trade.

    Issue 5: Foreign policy – I favor Thomas Jefferson’s foreign policy. Strike off the shackles on trade and commerce, welcome trade and labor to our shores, have entangling alliances with none. End the USA involvement in UN, NATO, SEATO, etc. Bring all the troops home. Return to a military consisting of a navy suited to protecting shipping interests from piracy and an army of a few thousand men. Stop mutli-year authorisations for the military. Cut the military budget (see fiscal policy above).

    Issue 6: Science policy – Eliminate government involvement in science funding. Global warming should clear up promptly. End NSF, NASA, etc. Tear down the buildings at every NASA facility and sow salt on the grounds so nothing ever grows there.

    Issue 7: End the wars on freedom, especially Nixon’s war on some drugs and Bush’s war on terror. Put the architects of these wars on the American people on trial for treason. Execute them upon conviction, by firing squad, to be carried on all licensed channels.

    Issue 8: Freedom of the press. End the FCC. Restore freedom of the press by no longer licensing media outlets.

    Issue 9: Deregulation: End the EPA, FAA, DEA, FDA, USDA, etc., etc., ad infinitum.

    Issue 10: RKBA. Encourage all states to give preferential tax status to anyone who keeps and bears arms, particularly in public. If a state has a sales tax, and a guy with a gun on his hip wants to buy something, the cashier should be authorised to push the “no tax” button. An armed society is a polite, healthy, property respecting society.

  18. the dollar is dissolving to its inherent value

    What is the inherent value of the dollar?

  19. watch From Freedom to Fascism

    Then, dismiss it for the paranoid conspiretardation that it is, and consider the average everyday American’s problems, which have little to do with a great deal of what Libertarians spend most of their time arguing about. 😉

  20. The issue of the decade is whether Americans rube will wake up, smell the coffee, realize they are not living in a free country and do something about it.

    A couple of problems here:

    1) It’s condescending, and people tend not to listen to you when you’re addressing them like lemmings or “rubes,”

    2) It doesn’t consider how Libertarians can do a better job of linking the issues to the real problems everyday Americans are facing. Americans of all political orientations understand that something is wrong — but most Libertarians are too busy trying to talk about abstract stuff that has no visible link to what they’re observing, rather than coming down to earth. And unfortunately, too many Libertarians are still tied up in conspiracy theory nonsense, which invalidates a lot of the observations we make in the eyes of the common man.

  21. “Then, dismiss it for the paranoid conspiretardation that it is, and consider the average everyday American’s problems, which have little to do with a great deal of what Libertarians spend most of their time arguing about.”

    Now I get your point about our little bickering. It’s senseless what we argue about, and the majority of Americans don’t care about our stupid problems. But I think the stuff in the movie is stuff that most Libertarians centrally agree on. How many libertarians support the income tax, federal reserve, IRS, RFID chips, or the Patriot Act?
    The party was founded after the gold standard was eliminated. I’m sure most Libertarians can point out that the problems we face can all be tracked down to the bloody Federal Reserve. If they can’t, we’ve really gone away from our roots just for these meaningless arguments about nothing.

  22. Uh, Mike, the fed is just one third of the problem. The other two thirds are the 16th and 17th Amendments.

    1913 was a very bad year…

  23. Direct election of Senators?
    *tilts head to side curiously*

    Everyone opposes that as well?

  24. How many libertarians support the income tax, federal reserve, IRS, RFID chips, or the Patriot Act?

    How many Libertarians believe there’s a global conspiracy/cabal to make implantation mandatory in order to usher in a one-world government?

    That’s the problem. The reality is bad enough — we don’t need to make up stuff.

  25. Susan, the inherent or intrinsic value of a dollar, as issued today by the Federal Reserve and printed by the USA government is the value of a small rectangular piece of paper with some ink on it. It is a bit stiff for toilet paper and not pleasant smelling when burnt. So, the short answer is: not much.

    “Government is the only institution that can take a perfectly good piece of paper, print some noble words on it, and make it perfectly worthless.” attributed to Ludwig von Mises

    According to the 1792 Mint Act, which fixed the value of the dollar, it is supposed to be worth 371.25 grains of silver. There are 480 grains in an ounce troy. So, up to 1964, an ounce of silver was worth $1.29 or so. In that year, Lyndon Johnson said that silver was now too expensive to be used for money. The French government and other people who were paying attention began to rapidly redeem their dollars for gold.

    As a result of the run on American gold, in 1968 the USA military was used to air lift gold to London to redeem dollars. At the height of the run, so much gold was placed on the weighing floor at Rothschild’s that the floor collapsed into the basement. London’s gold market was closed for two weeks. It was probably a deliberate event, and the market would have stayed closed longer, but the Swiss opened their market for redemption, and the run continued. In 1971 when the price on the world market had reached $42 per ounce and the USA gov’t was redeeming gold at $35 per ounce – you can see where that couldn’t last – Nixon closed “the gold window” and stopped redemptions. Another way to say it is Nixon repudiated the 1944 Bretton Woods accord.

    Today, an ounce of silver is worth $17.46 on the world market. An ounce of gold is worth about $927. The dollar index, which is a measure of the value of the dollar against a basket of other major currencies, is doing a nose dive. Here is a nice chart of that index:

    This year the dollar reached a new low on the dollar index. It has substantially penetrated below all known support. There is nothing holding it up but misplaced faith and chattering central bankers.

    The only way for the banking gangsters – banksters – and the government gangsters – ggangsters – to meet their obligations is to print money. Which is already inflating the price of nearly everything. At least half of the current price of oil is monetary inflation, I believe – the other half being supply problems related to war and rumors of war.

    To give you a sense of where that might go, if you look at the Yugoslav dinar in 1991, and you charted retail prices, money supply and the black market exchange rate for its currency using 100 as the base, you’d see those values all grow to ten sextillion (1 x 10^22, I think) by early 1994. Yugoslavia tried to print its way out of trouble. Today there is no Yugoslavia, the country having torn itself apart with hyperinflation, ethnic cleansing, and race wars.

    In January 1919, it took 12 German marks to buy an ounce of silver. Then the Wilson crowd imposed the Versailles treaty reparations on Germany. The Weimar Republic had no way to earn the marks needed to pay the reparations, so they printed them. By the 8th of November in 1923, it cost 543,750,000,000 marks to buy one ounce of silver. That was the day a guy with a brushy mustache – slightly narrower than Bob Barr’s mustache – jumped on a table in a Munich bar and declared a revolutionary government to overthrow the one in Berlin. His name was Adolf Hitler. As a result of their hyperinflation, the Germans also saw their economy destroyed and their country plunged into war, with ethnic cleansing a major element.

    I’m quite prepared to continue, if there is any interest in this topic.

    Mike – direct election of Senators breaks down one of the important elements of federalism. It reduces the power of the state legislatures. I think arguably the power of the several states was more significantly eliminated by the War for Southern Independence which had the rather alarming outcome of seeing 14 states occupied militarily – states which had done just what the 13 colonies had done in 1776. I think the issue is of minor significance. The constitution for these united States of America has either been powerless to prevent the tyranny under which we suffer, or has authorised every jot and tittle.

  26. bmillerlib, the average American may not like being called a rube, but it is nicer than “idiot fascist” or “worthless piece of shit”. I’ve tried being polite – it doesn’t work. And I could care less whether they listen to me – they have shit in their bed, let them sleep in it. I just wish they would quit shitting in mine. That goes for Libertarians too.

    If the rubes want freedom (that goes for Libertarian rubes also), they will resist tyranny. Until that time, they are doomed to suffer under tyranny. It’s really pretty simple.

    To petition the evil bastards that lord over us in the guise of being a legitimate government is a sure sign that one has crossed over into the realm of the delusional rube. 10 issues or 10,000 issues – it just doesn’t matter anymore.

    If the average American is not a rube, then they must be twisted psychos bent on making their own children debt slaves, sending their neighbor’s children to prison, and murdering the children of foreign nations to satisfy their imperial bloodlust. I would like to think they are merely rubes.

  27. I agree with Brian Miller’s general assessment of Freedom 2 Fascism. It’s an entertaining film, but not a good one from an information perspective. It’s assessment of the Federal Reserve and the problems thereof are off base, and I don’t buy the “there is no law” argument RE: the IRS. This movie is good if it energizes people to learn more (the truth), but bad to the extent that it leads them down the wrong path.

    For example, Russo approvingly quotes Lincoln, who wanted a monetary system that was EVEN WORSE than the Fed.

    And the movie also puts forth the idea that “if” the income tax was legal, then we should pay it. It is legal. It is still immoral.

    Susan – The intrinsic value of the dollar is $0, and that’s where it — like all fiat currencies that have come before it — is heading.

  28. Mike – Direct election of Senators is definitely a concept that should be opposed. Prior to the 17th, Senators were sent by state legislatures to serve as “ambassadors” of the states vs. the federal government. That created friction and maintained decentralist federalism, or, to use the ugly and inappropriate colloquialism “states’ rights.”

  29. Forgive my ignorance here, but wouldn’t you just have politicians electing more politicians there? Now you send that Senator to Washington. Who’s to say he’ll be a federalist, States vs. Federal kind of guy? What if the Senate works the same way it does now, except they won’t be elected by the people?

  30. Mike, you raise a valid point, but I think it’s a very straightforward one to answer… Senators are like other pols, their primary (only?) motivation is to get re-elected. That means you have to keep your constituents happy. With direct election, the constituents are “The Peepul” and you keep them happy by giving them goodies from the public trough – but since you can’t be seen as a “tax & spend” guy, you do a lot of camoflage welfare by imposing mandates on state and local gov’ts… So you end up with things like the Bureau of Education and “No Child Left Behind” that are bankrupting state and local gov’ts.

    If you have Senators elected by the state gov’ts – then his constituents are the state legislators – this insulates to some degree the welfare pressure, and you have the state legislators saying “Don’t pass something that will make US raise taxes…” and resist other efforts at taking away things that are seen as “State perogatives” – that puts them at odds with the Congressmen that ARE trying to do the welfare thing – and remember “Gridlock is GOOD!”


  31. But, of course, we had senators elected by state legislators and see where it got us? We still had the income tax and the feral reserveless system imposed on the country by state elected senators. I think it is rather fatuous to suppose that we’re going to solve all, or even any, of the problems of the USA government merely by returning the election of senators to the several states. The system that was conceived in the articles of confederation might have been better, but it broke down in 1787. The system that was conceived in the constitution might have been a good design, but it broke down in 1860. Where is the evidence that a constitutionally limited republic can be organised so that it survives with intact limits to power? This whole argument of the minarchists is that we have to have a coercive government, but we can somehow magically impose limits to its power so that it doesn’t grow beyond scope. Where is there any evidence that such a system has ever worked?

    Constitutionally limited republics may afford a breathing space while the authoritarians get together and conspire to surpass the limits. But they are nothing more than a stop-gap measure.

    Restoring the original intent of the founders of the constitution might be some good, since it would necessarily be a smaller and weaker federal government. But it would not be all good, because that same constitutionally limited republic has already grown beyond its bonds – the chains have already been broken. Why should we assume that what has happened before won’t happen again? Clearly, the wise assumption is that what has happened is possible.

  32. This whole argument of the minarchists is that we have to have a coercive government, but we can somehow magically impose limits to its power so that it doesn’t grow beyond scope. Where is there any evidence that such a system has ever worked?

    Don’t look behind the curtain!

  33. Susan, the inherent or intrinsic value of a dollar, as issued today by the Federal Reserve and printed by the USA government is the value of a small rectangular piece of paper with some ink on it.

    Right. Of course that’s always been true of paper money. In fact it’s true of metal money, too, except that makes an even worse butt-wipe. It sure is shiny, though!

    It’s the idea of ‘intrinsic value’ I was getting at; I wanted to see how you thought about it.

  34. The image of you putting a gold coin up your butt is now indelibly etched in my mind. Please don’t do that again.

    Paper has very little intrinsic value compared to gold or silver. Both gold and silver have properties that make them actually useful in electronics, photography, chemistry, nanotechnology, water purification, jewelry, and a host of other applications – you could look these up on, say, wikipedia.

    Paper money does not work well. It did not work well for the Mongol Khans in the Twelfth and Thirteenth Centuries. They made their paper money out of “bast” between the bark and the heart wood of mulberry trees. In other words, their money did grow on trees. And became about as valuable as sawdust. It did not work well for early 18th Century France or England, which saw a hyperinflation between 1710 and 1722 which ended in a sixty year depression. Not satisfied with that period of stupidity, both England and France, less than a century later, imposed fiat money in the form of the assignat and the paper pound. The assignat and its successor, the mandat, destroyed the economy of Revolutionary France and led directly to the Reign of Terror and the execution of shopkeepers for violating the law of the maximum. A whole lot of people who lost their lives to the guillotine did so because they dared to accept gold or silver coin in tender of payment. The paper pound was phased out, happily, with a return to gold and silver coins.

    Paper money worked poorly for both sides in the American war between the states. It worked poorly for the Chinese in the 1940s. Disastrously for the Vietnamese in the 1960s and 1970s. Terribly for the Germans and Austrians in the 1920s. Horridly for the Yugoslavians in the 1990s. It would be silly to suppose it would work well in the USA.

    But, to be clear, I am not in favor of a gold standard, nor of any other government imposed standard for money. I don’t think gold and silver coins are the ultimate solution to the problems with money. The ultimate solution is a free market in money. When people are free to tender and to accept whatever they please, the market will choose what is good money, what is better money, and what is the best money.

    Many of us in the industry think that the market is going to choose something like gold or silver coins. These have been identifiably better money for thousands of years.

    But, as you note, except for hiding the wealth you’ve got, pretty poor suppositories. The only thing gold and silver have going for them in that department is that both are anti-biotic. So your risk of infection from storing your wealth rectally is minimal.

  35. Jim, I wasn’t so much interested in the monetary side of the discussion as in the concept of intrinsic value. I see the term ‘intrinsic value’ used pretty indiscriminately, and it’s a small mission in my life to quash that 🙂 Value is a term that describes how people relate to things (including other people), and those relationships are constantly shifting. Something might have great value at one minute and zip value the next. In fact, it might even become a liability and have negative value to you.

    Both paper and meal have uses aplenty, but their value at any given time and place is determined solely by those wanting to either get rid of them or obtain them. To work from an example you mention, the value of silver in photography is pretty much nil without paper to print the image on.

    Naturally metal makes a better currency than paper in most circumstances, for reasons that are well documented. But it doesn’t have a higher ‘intrinsic value’. If you’re freezing to death and walking through a snowstorm, the paper dollars you use to line your boots would be much more valuable to you than the silver weighing you down – regardless of the silver’s possible use in photography or jewelry or whatever.

    Of course I agree with your thoughts on market vs government currencies.

  36. If the rubes want freedom (that goes for Libertarian rubes also), they will resist tyranny.

    There are smart ways to resist tyranny, and stupid feel-good ways to resist it.

    Linking arms in front of the rolling tanks and letting them crush you is stupid. So is insulting the people you’re going to have to convince in order to help turn things around.

  37. I think you are fixated on the term intrinsic value rather than on an understanding of what makes a good money. Money has three functions.

    It is a store of value. It is a medium of exchange. It is a unit of account.

    A money which makes a poor store of value, such as paper, becomes a poor medium of exchange and is a lousy unit of account. Paper is such a money. Governments do not have the power to apply value to paper which it doesn’t have. It is wishful thinking to suppose they do.

    It seems a pity you won’t have room for as much silver with that bug up your rump about the term “intrinsic value.”

    Naturally, you can find an example of a situation where someone would be happier to have paper than silver. So what? Anecdotal evidence isn’t much evidence. And it doesn’t make paper a better store of value.

  38. “Linking arms in front of the rolling tanks and letting them crush you is stupid. So is insulting the people you’re going to have to convince in order to help turn things around.”

    Written like a sycophant.

  39. I think you are fixated on the term intrinsic value rather than on an understanding of what makes a good money.

    I understand well enough what makes a good currency – which is why I wasn’t particularly interested in that part of the discussion and pulled out the phrase ‘intrinsic value’. I merely expressed interest in another facet of the conversation. Sorry if I wasn’t able to make that clear.

    Naturally, you can find an example of a situation where someone would be happier to have paper than silver. So what? Anecdotal evidence isn’t much evidence. And it doesn’t make paper a better store of value.

    I understand that – as I indicated by saying it at least once. Again, I was simply trying to isolate one concept – intrinsic value – from your discussion of money, and have a discussion about that.

    My point might be boiled down to this: I’m not sure it ever makes sense to modify the word ‘value’ with ‘intrinsic’, since value is an expression of an ever-shifting relationship rather than an inherent property. It would be analogous to modifying ‘rain’ with ‘dry’.

    That doesn’t mean that I disagree with you about the usefulness of metal as currency, or the essential stupidity of government-issued currencies (of any type – paper, metal, or cowrie shells). It just means that I wanted to discuss one particular concept you mentioned. I don’t see the point of having a discussion on points where we are in complete agreement.

  40. Of course, I did not originally use the word intrinsic to modify value. I used the term inherent. As in “essential characteristic,” which I think is more suited to a discussion of the dollar than “intrinsic.” The essential characteristic of the dollar as issued by the Federal Reserve is that it is a piece of paper. Whereas the essential character of the dollar as defined by the 1792 Mint Act is that it is so many grains of gold, or so many grains of silver, or so many penny weights of copper. (We can have an entirely separate discussion of the madness of tri-metallism. Makes bi-metallism look much less tragically foolish.)

    Given the nature of the idea of a store of value, being something that is highly likely to be useful to more people over a longer period of time than other commodities, I do think it is rational to view certain things as having an intrinsic or essential or characteristic value. To say that people over the last ten thousand years have valued silver more highly than paper is quite true, and quite reasonable.

    Many people have a dislike for the idea that values can be objective. Perhaps you are not an objectivist, or perhaps you are. I’ve had this discussion with both sorts. There’s no reason to expect that paper is going to one day prove to be more valuable to more people than silver, any more than there is any reason to expect the development of the philosopher’s stone, or the transmutation of elements by fusion, or access to even a single nickel-iron asteroid’s platinum group metals.

    Inherency is a term used in debate to describe the status quo. If an argument for change fails due to inherency, that is because the status quo embraces what is being suggested as a change. Paper money is inherent in the status quo, silver money is not.

    Personally, I find the discussion of what makes an intrinsic value to be rather tedious. Gold has considerable monetary density and has had that ability to store value compactly for thousands of years. Your agreement with this idea of what would make a good money is irrelevant to making it a good money, just as your idea that all values are circumstantial is irrelevant.

    Paper money and silver money are tools, and as such they may be used for either good or for evil. But, to say that there is no intrinsic moral value to them except as they come to be used is not the same as saying that they are equally useful as money.

    To be a good money, as my friend Doug Casey likes to say, something should be consistent, convenient, durable, divisible, and valuable in itself.


    “Money should be convenient, so we don’t use lead. In medieval China, ingots of iron were used, and they proved very inconvenient to lug around. So, the market outside China for iron money was limited. Camels, as I’ve illustrated, are convenient in some places, but generally not in others. They make a poor store of value. Livestock has been used as money for thousands of years – the word pecuniary comes from the Latin for cattle – and while livestock often have a natural dividend of reproduction, they are hard to store for more than a few years.

    “Money should be consistent, so we don’t use land. It is nearly impossible to know from one century to the next whether a given 100 acres of land is going to be valuable. A supervolcano under Yellowstone Park could make a lot of Wyoming land worthless next year, next century, or not for several thousand years. No way to know. An acre of land with good water and easy access to power and roads is better than a vertical acre of land far from water, power, and roads. Lakefront property with a nice view commands a premium. So, land is not consistent. In 1705, John Law conceived of money based on land, called the Mississippi Money. In 1718, the Regent that succeeded Louis XIV authorized John Law to create the “Banque Royale.” A few years later, the fiat money went hyperinflationary, and the longest, deepest economic depression in world history was begun. That depression lasted 60 years, from 1722 to 1782. Land makes a poor money.

    “Money should be durable. So, we don’t use wheat. It has been used, about five years ago, in Argentina. Basically, it became necessary to substitute contracts for wheat. Then various fraud schemes became prominent. Argentina’s government finally did the unthinkable. They bought gold to add to the reserves backing their currency and, suddenly, to the surpise of all politicians and no economists, their currency became acceptable in Argentina once again. Wheat is a poor store of value for more than a few months. Whereas gold and silver may be stored outside, in a metal box, underground, where it floods often. Years later, dig up the box, knock the rust off, and inside are gold and silver coins. The gold won’t even have tarnished.

    “Money should be divisible. Works of art by Rembrandt or Picasso won’t work. How do you make change? How do you convert from one Rembrandt to ten Picasso’s? (Inconsistency is a badness for money, and tastes vary.) Money should be fungible, like gold and silver. One ounce of silver is just like another. There may be some numismatic rarity to a particular coin, but if that image wears off, it is still silver. Great. So, it has value. And, half of that ounce of silver may be a clipped coin, not good for the coin collector, but it is still good silver metal.

    “Finally, money ends up having intrinsic value if it works well, because of the acceptance issue. It is just a lot easier to get acceptance for gold and silver. Thus, we should not long rely on paper issued by a government printing office. As Ludwig von Mises once said, ‘Only a ‘government could take a valuable commodity like paper and, by slapping some ink on it, make it utterly worthless.'”

    In this sense, I was using “intrinsic value” as a market driven feature. Acceptability is another way of describing the same thing.

    Circumstances don’t change enough to make it rational to expect paper to be more valuable than gold or murder more acceptable than trespass.

  41. Two points, mostly directed at Jim and Susan…

    1. While I am strongly in favor of getting rid of the 16th Ammendment so that we go back to having Senators selected by the states instead of by popular vote; I am under NO illusions that it will magically cure everything… My feeling is that it is more like something that might help curb some of the worst abuses, and certainly won’t hurt.

    2. Jim – one other thing that you left out of your discussion of reasons why paper makes a bad money… There should be a near FINITE supply, so that the value represented in a given unit doesn’t change… The problem with paper fiat currency is that there is nothing preventing the government from cranking up the printing press and making an effectively infinite supply at any moment. They CAN’T do that realistically with gold / silver / other commodity items… If that COULD be nailed down solidly, there wouldn’t necessarily be a problem with paper as “warehouse receipts” indicating that some amount of a commoditiy is in storage someplace and can be produced on demand – I.E. the paper and electronic Liberty Dollars before the gov’t stole the backing…

    The big problem of paper as a front for a commodity based currency is to ensure that people aren’t doing “fractional reserve” type stunts (better known as FRAUD…)

    OTOH, if somebody was to invent a high efficiency / high volume transmutation machine tomorrow that could convert (say for instance) paper into equivalent weights of gold, then gold would suddenly become a form of money no better than paper…


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