Sunday, December 23, 2007
Flirting
...with the gold standard.
I’ve long been fascinated by the gold standard. I’ve done a good bit of reading and study on the subject, and it’s only been recently, with some help from Megan McArdle, that I’ve really been able to put my thoughts in order.
The gold standard, as touted by Murray Rothbard and other libertarian economists, and as parroted by people like Ron Paul, is seductive simply because it is supposed to take control of the economy out of the hands of the government. The theory is that a true free market economy would work just fine without a central bank, with gold coins in various denominations (or gold certificates in their place) used as money. An added benefit, and usually that touted loudest by libertarians, is that taking control of the economy out of the hands of the government would prevent the manipulation of the economy by the government, and most specifically, remove the ability of the government to impose a “hidden tax” in the form of government created inflation on it’s citizens.
Apparently these people have never heard of coin debasement, where a government recalls circulating coins for the purpose of melting them down, diluting the valuable metal with some non-precious metal, and reminting the coins, thereby creating more coins than there were originally in circulation. Many governments throughout history have debased their coinage so severely as to create virtually worthless coins with almost no precious metal in them at all, increasing the number of coins in circulation ten-fold or more. Similarly, if instead of circulating coins we have notes backed by gold, what is to stop the government from deciding to change the amount of gold $1 is worth overnight?
So much for the gold standard being hard to manipulate.
The conclusion I’ve come to regarding the gold standard is the following.
There’s a quote I read somewhere that I can’t find, so I’m going to paraphrase it instead. It says in essence that the people are willing to tolerate an inept corrupt government, it doesn’t make any difference if that government is socialist, republican, dictatorial, democratic, or communist, the people will get inept corrupt government. All of these political systems are great in theory, if the participants, both civil servants and the populace, are perfect. So is a libertarian society for that matter, where no government is necessary because everyone behaves. The problem is that all of these scenarios are absurd right from the start, because people are not and can never be perfect or even close to it. The only governmental system that can be successful is one where man’s imperfections are recognized from the beginning and are in fact used as part of the check and balance process.
The point is, both the gold standard system and the fiat money system are easily manipulatable by unscrupulous governments. The scenario touted by libertarians, where the government can’t interfere in a gold standard economy, is a dream world. Governments can and will interfere in the economy, in any way they can. It’s a simple and obvious fact of life.
At that point, all that remains is to compare the simple pros and cons of the two systems. The fiat money system is far more flexible and responsive to changes in economic necessity. Simply, mismanagement or outright fraud can have significant negative consequences in either system. Good management, on the other hand, can have substantially great benefits in the fiat money system. With equal negatives and greater positives on the side of fiat money, fiat money wins.
This conclusion leaves a bad taste in my mouth. It requires trust in the government. The part that libertarians don’t seem to get is that the gold standard system requires just as much trust.
Regardless of the system in place, inept and unscrupulous people in government will find a way to screw the populace. Choose wisely.
Comments
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BRAVO! BRAVO! BRAVO!
[standing ovation]
And then to take your wonderful, clear explanation one step further.
It matters not a bit if the system of government is republican OR libertarian. It always comes down to integrity and trust, however we might scheme to limit it.
The people are the same so why would we trust these people with a libertarian government if we cannot trust them with a republican one?
It then comes down to analyzing the pros and cons and each, and a republican government wins.
Choose wisely indeed.
Mrs. du Toit | 12/23/2007 08:57 PM CDT -
Before I start, I would like to recommend that everyone one here go to iTunes do a search for, Anthony Knittel. On his, Liver Free or Die, Podcast. “Inflation and the Business Cycle: The Collapse of the Keynesian Paradigm” is by Murray Rothbard and at least with listening to him you will know what is “so” naive.
First, I find it insulting that you act like we wouldn’t know what coin debasement is. Most libertarians I know are fairly knowledgeable about economics. Their are two main reasons why coin debasement doesn’t enter libertarian discussions of the gold standard, one it’s assumed that we would do the standard libertarian thing of not allowing the government the right of coin debasement (constitution) or we would demand that the government not interfere with other people and organizations printing their own money. A good example being the Liberty Dollar thing. Basically, we realized that we were never going to convince the government to give up power of currency as we just started printing our own. We still pay all of our taxes and the things we must pay with FRN. But, we took to using real money of our own for everyday life. *laughs* And obviously the government did its normal evil thing of raiding them, stealing the money, and trying to crush our will to be free from interference.
So my question is, why have you forgot what Mr. One Dollar bill said, “Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.” You can’t rely on those in the government to rule wisely. If you really think that they will, then you haven’t been paying much attention, have you.Tomre Utsu Zo | 12/24/2007 10:18 PM CDT -
I’ve read quite a bit of Rothbard. He was a theorist to the nth degree - someone so enraptured by his own theories that he lost touch with reality.
So you want to prevent the government from interfering with a gold currency… by Constitutional amendment?
Name a Constitutional amendment, and I’ll show you how it has been subverted by the government.
I have no illusion about the government ruling wisely. The thing is, WE create that government. The disconnect with libertarians seems to be that they think we can postulate a set of rules, where if these rules are followed perfectly, everything will be hunky dory. Maybe that is true. But developing political and economic systems that depend on perfect adherence to a set of laws is either utter foolishness or dangerous autocracy.
You can postulate that the gold standard is a great thing with Constitutional backing, but the will of the people will not be denied. The Constitution is of little consequence when the will of the people is contrary to it, and your protections will be either amended away or completely subverted by Supreme Court decisions (commerce clause, anyone?). I can point out lots of examples if you need it.
Again, the ONLY way for the government to act as a responsible steward of the economy is for it to have decent people running the show. That’s OUR job. Constitutional amendment or not, the gold standard is just as easily subverted as fiat money when unscrupulous forces are at work.
I find this whole Liberty Dollar thing somewhat entertaining too. Heard of Gresham’s Law?
American Farmer | 12/24/2007 10:46 PM CDT -
Yes, I’ve heard of it. How do you feel it applies to this conversation?
I’d like to hear what you consider entertaining about the Liberty Dollar thing. Do you normally find the violation of your civil rights (regardless of you not excersising them, that you lost the right still stands) entertaining? Does it not put a chill in your heart hearing about to see such blatent government thugery against innocent people?Tomre Utsu Zo | 12/25/2007 09:12 PM CDT -
Bad money drives good money out of circulation. Why would anyone with a solid grasp of economics seriously latch on to an alternate currency in the current economic climate? That’s what I find entertaining, the fuss over something that’s doomed to failure right from the beginning.
The government’s overreaction to the whole thing just reduces it to the level of a farce.
American Farmer | 12/25/2007 11:18 PM CDT -
Mostly as a form of protest. By using Liberty Dollars we are telling the government that we are fed up with their fraud. Gresham’s Law, should also not take effect here because as the dollar devalues they revalue the L$ so that one can continue using them on a 1-to-1 basis.
Again, you have failed to tell me how you feel about what basically boils down to an assault on free speech and right to property.
Tomre Utsu Zo | 12/26/2007 01:41 AM CDT -
I’ll try to be more clear regarding my feelings on the “assault on free speech and right to property”.
I think the Liberty Dollar folks are wasting time and energy on a form of protest that has no chance of doing anything except making them feel good about themselves. They are asking for a beat down, getting it, and then doing a “help help I’m being oppressed” routine. It’s a classic case of pissing into the wind. Call me heartless, but I just have a hard time being sympathetic when someone does something stupid and pays the consequences.
And as usual, the government reacts in an unnecessarily heavy-handed fashion. If they had a clue, which they don’t, they’d let the Liberty Dollar people have their little protest, which everyone else will completely ignore, and which will ultimately come to nothing.
I suppose you are wanting me to get all indignant or something. I prefer to save my energy for things of some consequence. If the Liberty Dollar folks were doing something that mattered, I’d care a little more. If they were not trying so hard to bait the beast into eating them, I’d care at little more. As it is, you’re creating your own trouble for no good reason and expecting me to feel sorry for you. I’m too cruel/heartless/practical for that.
American Farmer | 12/26/2007 07:38 AM CDT -
Tomre Utsu Zo,
The point is that there is no magic piece of paper with which you can write a contract between a people and its government that will prevent/withstand abuse, treachery, or manipulation.
But your comment belies an even larger disconnect: The Original Intent of the Founders and the Constitution, in fact everything they were about, is that The People have a RIGHT to whatever government THEY want. So our government has changed over time because that is what The People wanted.
That is why the Founding documents included the method by which the government could be altered.
It can be as fundamentally altered as The People desire.
Further, they realized that every law that could be written had not been written, so they created representatives who would act ON THE PEOPLE’s BEHALF to do that.
If The People were unhappy/displeased with the laws and policies enacted by THEIR GOVERNMENT REPRESENTATIVES they could change them, simply by voting for someone else next time.
This is the government THE PEOPLE want. It may not be the one YOU want, but this is the one WE want.
Most of us may be dissatisfied with particular aspects. That’s what happens when more than one person is involved: You have to compromise. You get some of what you like/want and give up some of what you don’t.
What you are talking about is magical thinking. There is no magic button, parchment, or squadron of Jedi Knights (and in another story they’re simply Jack Booted Thugs) who would prevent THE PEOPLE from having what they have every right to have: A government of and by The People.
You confuse compromise with an erosion of freedom, but the very “freedom” you profess to want is one that would limit/curb or curtail the FUNDAMENTAL right of a people to have control of their government, to do as they direct, and to change as they see fit.
Think about what would have to happen or what it would mean to have ANY aspect of our government unchangeable. How, exactly, would you make ANY part of our government fixed, like gospel. Who would enforce that? Libertarian Jedi Knights? How would they be different or why should they be trusted anymore than anyone else? Are they appointed? Do they self-appoint? Are they elected?
So why would they be pure of heart and free from manipulation, abuse, or greed anymore than anyone else who holds political office?
Establishing a government that cannot change, that cannot be altered, is the absolute end of freedom. It bonds future generations to the government of their ancestors.
That our Creator made the earth for the use of the living and not of the dead; that those who exist not can have no use nor right in it, no authority or power over it; that one generation of men cannot foreclose or burthen its use to another, which comes to it in its own right and by the same divine beneficence; that a preceding generation cannot bind a succeeding one by its laws or contracts; these deriving their obligation from the will of the existing majority, and that majority being removed by death, another comes in its place with a will equally free to make its own laws and contracts; these are axioms so self-evident that no explanation can make them plainer; for he is not to be reasoned with who says that non-existence can control existence, or that nothing can move something. They are axioms also pregnant with salutary consequences.
--Thomas Jefferson to Thomas Earle, 1823What you propose is the epitome of tyranny. There is no way to guarantee absolute control and limit on what OUR government can do without stripping the rights of The People to have whatever government they choose, with whatever power we choose to give them. That includes deciding if we have a monetary system based on the gold standard or a fiat system.
If you want to convince the people that the gold standard would be better, then you have every right to do that. But you cannot pass, by magic wand, a method of assigning magical beings to prevent it (or any other method) from being manipulated or abused.
There is no such thing.
Mrs. du Toit | 12/26/2007 08:10 AM CDT -
I am sorry, we seem to be looking two different intents. I seem to have understood that the FF’s felt that the government was a necessary evil there for the purpose of securing the rights of the people from being over turned by the strong. (Or at least that’s what I see when I look at the Bill of Rights and Declaration of Independence.)
Yet, somehow you understand it to mean give right to the carte blanche tyranny of the many. And, I admit, I hold you in contempt for it too. That you can look at the history and philosophy of the American Revolution so glowingly and not come away with a respect for Natural Rights is amazing to me. As a final though to you Mrs. du Toit, if 51% (or 99.9999%) of the US (or the government that represents it) voted to gang rape Wendy, would that mean an end to Wendy’s right not to be raped?
To the American Farmer:
“First they came for the Communists,
and I didn’t speak up,
because I wasn’t a Communist.
Then they came for the Jews,
and I didn’t speak up,
because I wasn’t a Jew.
Then they came for the Catholics,
and I didn’t speak up,
because I was a Protestant.
Then they came for me,
and by that time there was no one
left to speak up for me.by Rev. Martin Niemoller, 1945”
Tomre Utsu Zo | 12/26/2007 10:24 PM CDT -
It has sometimes been remarked as strange that I never joined in any agitation, or took the part of a propagandist for any movement against the State, especially at a time when I had an unexampled opportunity to do so. To do anything of the sort successfully, one must have more faith in such processes then I have, and one must also have a certain dogmatic turn of temperament, which I do not possess. To be quite candid, I was never much for evangelization; I am not sure enough that my opinions are right, and even if they were, a second-hand opinion is a poor possession. Reason and experience, I repeat, are all that determine our true beliefs. So I never greatly cared that people should think my way, or tried much to get them to do so. I should be glad if they thought - if their general turn, that is, were a little more for disinterested thinking, and a little less for impetuous action motivated by mere unconsidered prepossession; and what little I could ever do to promote disinterested thinking has, I believe, been done.
According to my observations (for which I claim nothing but that they are all I have to go by) inaction is better than wrong action or premature right action, and effective right action can only follow right thinking. “If a great change is to take place,” said Edmund Burke, in his last words on the French Revolution, “the minds of men will be fitted to it.” Otherwise the thing does not turn out well; and the processes by which men’s minds are fitted seem to me untraceable and imponderable, the only certainty about them being that the share of any one person, or any one movement, in determining them is extremely small. Various social superstitions, such as magic, the divine right of kinds, the Calvinist teleology, and so on, have stood out against many a vigorous frontal attack, and thrived on it; and when they finally disappeared, it was not under attack. People simply stopped thinking in those terms; no one knew just when or why, and no one even was much aware that they had stopped. So I think it very possible that while we are saying, “Lo, here!” and “Lo, there!” with our eye on this or that revolution, usurpation seizure of power, or what not, the superstitions that surround the State are quietly disappearing in the same way.
Albert Jay Nock, “Anarchist’s Progress”, 1928
American Farmer | 12/27/2007 07:20 AM CDT -
Absolutely bat shit nuts. Tomre Utsu Zo , you’ve demonstrated in one comment your contempt and mistrust of a government of and by the people.
What in the hell does Niemoller’s poem have to do with what we’re discussing. Is that the only quote you know?
As a final though to you Mrs. du Toit, if 51% (or 99.9999%) of the US (or the government that represents it) voted to gang rape Wendy, would that mean an end to Wendy’s right not to be raped?
Yes, The People COULD do that. They COULD. Why haven’t they? Because they don’t want to do horrible things like that.
Do you see the little Jefferson quote on the left side of the page?
Society [has] a right to erase from the roll of its members any one who rendered his own existence inconsistent with theirs; to withdraw from him the protection of their laws, and to remove him from among them by exile, or even by death if necessary.
--Thomas Jefferson, 1815And you can read that and think for one second that an individual’s rights can trump society?
Here’s a few more:
[It is] the people, to whom all authority belongs.
--Thomas Jefferson, 1821I consider the people who constitute a society or nation as the source of all authority in that nation; as free to transact their common concerns by any agents they think proper; to change these agents individually, or the organization of them in form or function whenever they please; that all the acts done by these agents under the authority of the nation are the acts of the nation, are obligatory on them and enure to their use, and can in no wise be annulled of affected by any change in the form of the government or of the persons administering it.
--Thomas Jefferson, 1793Every man, and every body of men on earth, possesses the right of self-government. They receive it with their being from the hand of nature. Individuals exercise it by their single will; collections of men by that of their majority; for the law of the majority is the natural law of every society of men.
--Thomas Jefferson, 1790And where else will [Hume,] this degenerate son of science, this traitor to his fellow men, find the origin of just powers, if not in the majority of the society? Will it be in the minority? Or in an individual of that minority?
--Thomas Jefferson, 1824Where the law of the majority ceases to be acknowledged, there government ends, the law of the strongest takes its place, and life and property are his who can take them.
--Thomas Jefferson, 1809Absolute acquiescence in the decision of the majority, the vital principle of republics, from which is no appeal but to force, the vital principle and immediate parent of despotism, I deem [one of] the principles of our Government, and consequently [one of] those which ought to shape its administration.
--Thomas Jefferson: 1st Inaugural, 1801.If the measures which have been pursued are approved by the majority, it is the duty of the minority to acquiesce and conform.
--Thomas Jefferson, 1811What is true of every member of the society, individually, is true of them all collectively; since the rights of the whole can be no more than the sum of the rights of the individuals.
--Thomas Jefferson to James Madison, 1789All… natural rights may be abridged or regulated in [their] exercise by law.
--Thomas Jefferson, 1790Self-love… is the sole antagonist of virtue, leading us constantly by our propensities to self-gratification in violation of our moral duties to others. Accordingly, it is against this enemy that are erected the batteries of moralists and religionists, as the only obstacle to the practice of morality. Take from man his selfish propensities, and he can have nothing to seduce him from the practice of virtue. Or subdue those propensities by education, instruction or restraint, and virtue remains without a competitor.
--Thomas Jefferson, 1814Egoism, in a broader sense, has been… presented as the source of moral action. It has been said that we feed the hungry, clothe the naked, bind up the wounds of the man beaten by thieves, pour oil and wine into them, set him on our own beast and bring him to the inn, because we receive ourselves pleasure from these acts… These good acts give us pleasure, but how happens it that they give us pleasure? Because nature hath implanted in our breasts a love of others, a sense of duty to them, a moral instinct, in short, which prompts us irresistibly to feel and to succor their distresses… The Creator would indeed have been a bungling artist had he intended man for a social animal without planting in him social dispositions. It is true they are not planted in every man, because there is no rule without exceptions; but it is false reasoning which converts exceptions into the general rule.
--Thomas Jefferson, 1814Tell me again that the Founders were about the egotistical self-interest of the individual and the careless exercise of natural rights, in conflict with his moral duties to society?
It ain’t in there. There is nothing about Original Intent that places the individual’s self interest above his duties to society.
Mrs. du Toit | 12/27/2007 08:36 AM CDT -
Today’s response shows what has been dawning on me, Mrs, du Toit. You are a Leftist Conservative. The Jefferson you quote is the Jefferson who was a Leftist. And you fully ignore his liberalism (his belief in the need for revolution in honest government amongst other things.) But, I don’t hate you for this. Your entire generation is infatuated with the idea of subsuming yourself to some thing else. I think it may have been something in the water.
What you seem to not see is just how close your views mirror National Socialism. But, when you say that society is end you echo Hitler, Mussolini, and Roosevelt. I had been hoping to find some common ground in natural rights before discussing the as important nuts and blots of how liberty is more effective at organizing society for the greater good then any top down system. But I see that you can’t be reasoned with.
So, I shall confine myself to raging at the monitor vice the keyboard.
(oh, and as a sidenote, for a joke, mention my screen name to Wendy for me. You might get a laugh.)
Tomre Utsu Zo | 12/27/2007 08:17 PM CDT -
To American Farmer:
Those who lived during the time of your predecessor might have begged to differ. For which I am thank full, and show my admiration with imitation.Tomre Utsu Zo | 12/27/2007 08:30 PM CDT -
But I see that you can’t be reasoned with.
Oh, gee, I’m mortified. A 28 y/o has bested me again and I and others in my generation will just resign ourselves to the ice flow, lest we continue to impose our ignorant views of the world on the superior youth.
And you called me a Nazi, a Socialist, and a Communist in one blow. A Trifecta! Thanks. I haven’t been called that in… lemme see… at least a month.
Guess that means you’re disgusted with me/this site and won’t be coming back.
Boo hoo.
Mrs. du Toit | 12/28/2007 01:49 AM CDT -
I have a lot of admiration of what the founding fathers tried to do, they did not want a democracy (blackmail of the minority by a perceived majority)but intended to limit government’s power to only what an individual could morally do himself (not steal for one). It has been alleged that fiat money is the tool of communism and the ideal weapon to destroy the middle classes, infact back along several presidents were against a national bank to limit the control banks have on government.
Chris Edwards | 12/29/2007 04:17 PM CDT -
To illustrate the point… what if our currency had been tied to salt?
It had been a valuable and rare commodity for centuries.
It would have had disastrous consequences.
What happened when we went off the gold standard, in addition to all the other reasons for going off of it (which had been discussed/debated for years), was that there were huge veins found in both Russia and South Africa. That was the final straw.
With Russia and South Africa able to release to the market (or withhold) gold (as De Beers does to artificially inflate the not-rare in the slightest diamond market), our economy and those of the rest of the world, would be at the mercy of those two countries.
Commodities can either be controlled completely by the market (such as De Beers controls diamonds) or the monetary system can be controlled by governments.
If you think that a company like De Beers can be trusted more than governments, then you don’t know anything about De Beers, or the sham that is the entire diamond industry.
Mrs. du Toit | 12/31/2007 08:20 AM CDT
