Exhibition Match: Murphy vs. Crucini on Gold vs. Fiat Money
I should clarify that Mario Crucini, a professor at Vanderbilt, is not a Keynesian. However, this Thursday at 5pm we will be debating the merits of a gold standard versus fiat money. The event is open to the public but it will not be recorded. You still have time to buy your plane tickets.
DETAILS:
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Matt Collins (a local liberty activist) was kind enough to summarize all the info and even make a Facebook deal about it:
This coming Thursday night, April 21st, at 5PM, free-market Austrian School economist and author Dr. Robert Murphy and Vanderbilt Professor of Economics Mario Crucini will be debating “Paper Money vs. Gold & Silver.” This event is open public with free admission and will be held at the Vanderbilt Commons Center Room 235/237. The debate will last about an hour and there will also be a catered gourmet reception after the debate. If you plan to attend, please RSVP on Facebook. Parking information can be found here: http://www.vanderbilt.edu/traffic_parking/visitor-parking.php
Here is the official Facebook Invite: www.facebook.com/event.php?eid=203346393032419
Did you ever post your debate with the Fed guy?
No I’m still waiting on someone to edit the video. I’ll check in again.
Be sure to mention that nations on a fixed currency, such as a gold standard, require a nation to sacrificing it’s sovereignty, limits freedoms, destroys liberty, encourages wars, and is a tool for central planners.
Current issues in Europe and China prove are perfect examples of my point. Why anyone other than socialists or authoritarians supports a fixed currency anymore is beyond me.
AP Lerner, now you’re just being absurd. I still read your stuff about banks not being reserve-constrained because I am open to the possibility that the conventional textbook approach is totally wrong.
But when you say the gold standard encourages wars, you are being absurd. Why did all the belligerents go OFF the gold standard during World War I? (The US was a mixed case.) And the standard argument *against* gold is that is constrains governments in emergencies, like a war.
And yes I see all the central planners rushing to abolish fiat currencies and tie their hands to gold.
Bob,
Didn’t Scott Horton have a devil’s advocate type MMT question for you last week on his antiwar radio show?
Scary.
I vaguely remember but I can’t say anything else about it.
“I am open to the possibility that the conventional textbook approach is totally wrong”
Cool!
“But when you say the gold standard encourages wars, you are being absurd. ”
Really? So if gold becomes the worlds reserve currency, there won’t be a rush to accumulate gold by all nations? There is only two ways to accumulate gold if you don’t have a mine in your backyard, and that’s to become an export nation (and fyi, not everyone can become a net exporter), or invade countries that have a mine. Historically, how many wars have been fought over gold? Can you really say zero? Look at how many wars we fight over oil….
And, historically, central governments have kept their citizens poor to keep the export sector competitive in an effort to accumulate gold? You think this is a good thing?
And historically, countries never invaded other countries to accumulate gold? Really?
“And yes I see all the central planners rushing to abolish fiat currencies and tie their hands to gold”
The Euro is effectively a fixed currency. It’s a gold standard. All member states have fixed their currency to a commodity they have zero control over. The Euro. You don’t see the central planning occurring in Europe as we speak? You have not noticed the ECB, an unelected entity, is dictating fiscal policy to member states?
How can anyone that believes in the free market agree with having the price of money not determined by market forces?
So if gold becomes the worlds reserve currency, there won’t be a rush to accumulate gold by all nations?
You mean all nations will scramble to produce more? Egad!
There is only two ways to accumulate gold if you don’t have a mine in your backyard, and that’s to become an export nation (and fyi, not everyone can become a net exporter), or invade countries that have a mine.
Paging Adam Smith. Noob in 2011 is espousing a doctrine you refuted over 250 years ago. Help him!
Historically, how many wars have been fought over gold?
Exactly less than the number of wars governments have had to wage on their own people to enforce a paper money monopoly.
Can you really say zero? Look at how many wars we fight over oil.
So gold can’t work according to you because governments are evil and steal gold.
Hey, the last time I read that kind of a capitulation, slavery still existed the world over.
And, historically, central governments have kept their citizens poor to keep the export sector competitive in an effort to accumulate gold? You think this is a good thing?
Do you propound mercantalist fallacies because you’re trying to be funny or do you actually believe them?
The Euro is effectively a fixed currency. It’s a gold standard.
BWAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA
AP Lerner advised me to read the real Abba Lerner, father of MMT. I did. He’s a commie.
http://www.flickr.com/photos/bob_roddis/5560086644/in/set-72157626353319778
Abba Lerner was a main opponent of Mises during the socialist calculation debate. Lerner admitted that he lost to Mises regarding prices, but then proposed some absurd socialist price system.
A socialist, yes, but a rather unusual kind of socialist (i.e. one who opposed price controls, praised markets and competition, etc.)
AP Lerner’s MMT guru, Abba Lerner (1903-1982) proposed a ghastly draconian price control system as late as 1980:
Lerner found the implications of sellers’ inflation so important that, beginning in the 1960s, he changed his research program to center on finding cures for sellers’ inflation. Initially he toyed with various administrative wage and price control policies, but he found those lacking and soon gave them up. He replaced them, first, with a tax based incomes policy and ultimately, a market based incomes policy in which property rights in prices are set and individuals have to buy the right to change prices from others who change their price in the opposite direction. It was this idea that formed the basis of our market anti inflation (MAP) book. (Lerner and Colander 1980) Under MAP, rights in value added prices would be tradable so that any firm wanting to change its nominal price would have to make a trade with another firm that wanted to change its nominal price in the opposite direction. Thus, by law, the average price level would be constant but relative prices would be free to change.
http://tinyurl.com/4rfk3jk
Individuals have to buy the “right” to change prices from others who change their price in the opposite direction? Now there’s brilliant insight from a true economist. This Abba Lerner fellow is an economics denier. BTW, if inflation can be easily whipped with taxes assessed by magical, all-knowing bureaucrats (as claimed by AP Lerner and the present day MMTers), what was the purpose of Lerner’s mad price control scheme?
nations on a fixed currency, such as a gold standard, require a nation to sacrificing it’s sovereignty, limits freedoms, destroys liberty, encourages wars, and is a tool for central planners.
First off, the gold standard is not a fixed currency standard, because the continuous production of gold increases the supply of gold over time.
Second, by your logic, you and I and every other citizen in the country who are prevented by law from creating and using our own money must be subjected to all the problems you laid out above, victimized and threatened in those above ways by people in the country who *do* have the ability to create their own money, namely those who control the Federal Reserve System.
You just argued, unintentionally, that the US citizen who cannot create and use his own money, is having his sovereignty sacrificed by, his freedom limited by, his liberty destroyed by, is victimized in war by, and is treated as a tool by, those in the US who can print their own money, namely those who manage the Federal Reserve System.
Why anyone other than socialists or authoritarians supports a fixed currency anymore is beyond me.
You’re mind is thinking so irrationally you are literally holding the opposite of reality as truth. It takes socialism and authoritarianism to even enforce a system of fiat money and abolishing of gold, because gold tends to be the money of choice by the market. Paper money will never be the money of choice in the free market because paper is not nearly rare enough.
Gold is, or at least has historically been, the money of choice in free societies. To claim that only socialists and authoritarians would support gold is like saying up is down and black is white. You’re off your rocker.
Add to all this the fact that your ideal monetary system requires socialism and authoritarianism, only shows how incredibly oblivious you are to your own nonsense.
I don’t think I have ever read a more fallacious and irrational post. You could have typed a bunch wing dings and made as much sense.
“First off, the gold standard is not a fixed currency standard, because the continuous production of gold increases the supply of gold over time.”
China does not have a fixed exchange rate because continuous printing of the dollar increases the supply of dollars over time.
wait… what?
A fixed currency is not the same thing as a fixed exchange rate (peg) between two inflationary currencies.
Increasing gold production doesn’t make the gold standard any less fixed than the yuan when increasing dollar printing. I don’t understand what you’re trying to say. Under a gold standard, the dollar would be fixed to gold just as much as the yuan is fixed to the dollar. How does increasing gold production prove that the gold standard isn’t a fixed currency standard?.
Can someone else please confirm I’m not talking nonsense here? I didn’t realized there was any controversy that the gold standard was a fixed currency standard.
Increasing gold production doesn’t make the gold standard any less fixed than the yuan when increasing dollar printing.
Actually increasing gold production is precisely why the gold standard is not fixed. Fixed implies no change. Gold production implies change. You’re confused.
Under a gold standard, the dollar would be fixed to gold just as much as the yuan is fixed to the dollar.
No, under a gold standard, GOLD would BE money. “The dollar” would be a euphemism for referring to a specific weight of gold, should the name dollar persist at all.
It won’t be fixed because the supply of gold will rise over time. The fixed peg of the Yuan to the dollar is the Chinese government setting a certain exchange ratio of their inflationary Yuan to the inflationary Dollar. The more inflationary the dollar becomes, the more inflationary the Yuan becomes (at least in the foreign exchange market).
Increasing gold production doesn’t make the gold standard any less fixed than the yuan with increasing dollar printing. I don’t understand what you’re saying. How does increased gold production prove than the gold standard isn’t a fixed currency standard? The dollar would still be fixed to gold just as much as the yuan is fixed to the dollar. Fixing a currency to gold and fixing a currency to another currency would obviously have different outcomes, but they’re still fixed.
Can someone please confirm I”m not talking nonsense here? I didn’t realize there was any controversy to this.
DJ,
For what it is worth, I am in the ‘Austrian’ free market money camp, and I agree with you. I am not familiar with any noteworthy Austrian economist who has argued the gold is not a ‘fixed’ currency because the supply of gold will increase over time (or any other commodity money that would arise on the free market).
As I understand it, the definition of fixed currency is a currency that is fixed to some ‘monetary’ commodity, whether something chosen by the market, or a some other fiat (or quasi-fiat) currency. To CF’s point I would agree that the former is not the same as the latter, but that does not mean a currency ‘fixed’ to gold is not fixed because the production of gold increases over time.
@ Richard Moss
Thank god I’m not actually nuts then. I was beginning to doubt myself seeing how strange it was that I had to explain to an Austrian out off all people what the gold standard was a fixed currency standard.
Oh well. The meaning of “fixed” isn’t a terribly important thing anyway.
Your confusion rests on the idea that in a gold standard, the money is not actually gold but the pieces of paper, and these pieces of paper are “backed” by gold, making the exchange relationship between paper and gold a “fixed” one. But that is incorrectly interpreting a gold standard. In a gold standard, GOLD is money. The pieces of paper are not the money, they are transferable claims to gold money.
Since gold itself is increasing in supply, a gold standard is not fixed. Similarly, in a fiat standard, the supply of paper money is increasing, which is also why it is not fixed.
Richard Moss is also incorrect because he too is treating “currency” as the paper, and the “currency” is “backed” by a fixed quantity of commodity. But in a commodity standard, the commodity IS the currency. The paper is a transferable claim. One could call that paper a currency but it’s not technically correct.
CF,
You wrote that a gold standard system is not a fixed currency system because there is in increase in the amount of (monetary) gold produced over time.
If a fixed monetary system is one in which a monetary commodity, be it real or completely fiat, is one in which the monetary commodity remains fixed over time, then this is a new one on me.
Every reference to a ‘fixed’ monetary economy of which I am familiar has nothing to do with whether the amount of money in such a system remained ‘fixed’ in supply over time.
In reference to any such system I have read about, ‘fixed’ has always meant ‘fixed’ in reference to some underlying commodity, whether real of fiat.
Noting that a paper currency is ‘fixed’ to an underlying commodity does not imply that that paper currency itself is what is valued, rather than its standing as a claim to the underlying monetary commodity. By virtue of the fact it is valued as such, its quantity is ‘fixed’ by the amount of the monetary commodity it lays claim to.
I would agree that saying a gold standard and a ‘dollar’ standard are the same monetary systems because both are based on a currency ‘fixed’ to an underlying monetary commodity is incorrect. Desolation Jones also acknowledged this.
If you could reference a professional Austrian economist who argues that describing a gold standard as a ‘fixed’ currency system is flawed because the amount of monetary gold produced would increase over time, and will lead one to make economic errors, I would appreciate it.
Good post, RM. Captain Freedom seems to be making up a whole new definition of what’s meant by fixed in the context of monetary systems.
Lets just see how Rothbard himself used the word fixed.
“The sound money is the genuine gold standard; “genuine” in the sense that each currency is defined as a certain unit of weight of gold, and is redeemable at that weight.
Exchange rates between currencies were “fixed” in the sense that each was defined as a given weight of gold; for example, since the dollar was defined as one-twentieth of a gold ounce and the pound sterling as .24 of a gold ounce, the exchange rate between the two was naturally fixed at their proportionate gold weight, i.e., £ 1 = $4.87. ”
http://murrayrothbard.com/The_World_Currency_Crisis.html
I also get the feeling Captain Freedom is hesitant to call the gold standard fixed because the word “fixed” sounds like it’s restrictive and anti freedom in a way. But there’s no need to feel that way! As Robert Murphy explains:
“Let’s take these one at a time. To criticize a monetary system based on gold as “rigid” only makes sense if you believe that printing green pieces of paper makes a country richer. After all, the only rigidity enforced by the gold standard is on the central bank’s use of the printing press. Requiring the government to maintain a fixed dollar/gold exchange rate is “restrictive” in the same way that the Bill of Rights limits the discretionary power of the feds.”
http://mises.org/daily/3368
see? fixed = freedom! Embrace it!
Desolation, Rothbard is using “fixed” the same way I use it. “Fixed” as in fixed exchange rates between two currencies.
Gold ITSELF is not being treated as fixed.
A gold standard is not fixed. A gold standard with multiple currencies with multiple definitions (dollar, pound, franc, etc) and multiple gold weights (ounces) attached to those definitions, generates a “fixed” relationship between the CURRENCIES, not gold itself.
In the second quote you cited from Rothbard, the “fixed” is referring to the fixed exchange ratio between a paper dollar and a weight of gold attached to it.
Gold itself is not fixed.
Yes, all kinds of catastrophes happens when warehouses aren’t allowed to rent out the stuff I store there. (???)
In the post you describe this as a debate on fiat money v. a gold standard, whereas the event itself is titled “Paper Money vs. Gold and Silver.”
This raises a question I’ve been meaning to ask for a while now, namely whether from an Austrian perspective there is any difference between a gold standard as opposed to a silver standard, or bimetalism, or some other combination of precious metals?
Well bimetallism is dumb, if it means the government enforces a fixed exchange rate between gold and silver. Then Gresham’s Law kicks in, and it’s in practice an alternating standard.
My real preference of course is for the government to get completely out of money. I would take a silver standard over fiat any day, but I would prefer gold over silver standard because I think that’s what most people consider to be the market-based money. E.g. a tuna fish standard for the dollar would be a bit weird.
Well bimetallism is dumb, if it means the government enforces a fixed exchange rate between gold and silver. Then Gresham’s Law kicks in, and it’s in practice an alternating standard.
Isn’t it tragic how George Akerlov, in his “Market for Lemons” paper, totally misunderstood Gresham’s Law, and incorrectly applied to goods in a free market with voluntary pricing, and yet the paper went on to be the foundation for a whole new generation of statist economists, who now claim government intervention is justified because without it, in a free market, good products will be driven out by the bad on the basis of producers exploiting “asymmetric information”?
Well bimetallism is dumb, if it means the government enforces a fixed exchange rate between gold and silver. Then Gresham’s Law kicks in, and it’s in practice an alternating standard.
Sure, but what’s wrong with having an alternating standard?
Hmm not sure. Women would get confused if they had to keep switching their earrings?
It has to do with efficiency. gold is just the most efficient metal to be used as a currency as it has all of the attributes necessary to facilitate trade between goods and services that have a wide parity in value in an economy. e.g. cars vs toilet paper.
What attributes does gold have that silver (or gold and silver) lack?
higher unit value
It’s an interesting side debate about what really should be backing the currency, sure. If you really wanted to reduce the backing commodity’s value-volatility, you could define a dollar to be some fraction of an ounce of gold PLUS a fraction of an ounce of silver PLUS a fraction of a bushel of corn PLUS … PLUS some fraction of an hour of massaging from the 3rd-best parlor PLUS some fraction of a large Papa John’s pizza. And then only allow redemptions of $10 million or more.
But, again, these are minor issues compared to the f’ed up incentive structure and favoritism the current US monetary system has.
I thought the only correct libertarian position in regards to what should be money is “whatever the market decides”. In which case saying “it will be gold” is just a guess because it could be platinum or titanium, and if it were a metal based system it would likely be a few metals all floating against eachother. In fact I think that if you were to allow free competition in money now it will still be paper, with different banks issuing their own notes.
The only way the market would “choose” gold for certain is if you created a law that only gold is legal tender, although I am sure the gold lobby controlled Mises Institute and LRC would have no problem with this.
I thought the only correct libertarian position in regards to what should be money is “whatever the market decides”. In which case saying “it will be gold” is just a guess because it could be platinum or titanium
In principle yes, but because for the last 6000 years gold has always been the money of choice for societies that advance past the early and rude state and become somewhat complex in terms of division of labor, gold and “whatever the market decides” are pretty much synonymous. But technically you are right. The libertarian solution is “whatever the individual decides.”
The only way the market would “choose” gold for certain is if you created a law that only gold is legal tender
Nobody is claiming the market would choose gold for certain. But the likelihood is astronomically high.
although I am sure the gold lobby controlled Mises Institute and LRC would have no problem with this
*blinks*
Gold lobby controlled Mises Institute and LRC? Thanks for the laugh, but you owe me a new keyboard, because I just spit my coffee all over it after reading what you just said.
Actually, I believe silver has functioned as money more often than gold historically because gold was often too rare.
In various areas of the world, you’re right.
I take what Rothbard said seriously, “there is no accidental theory of history” [paraphrased].
Look at the sponsors of all Mises Institute events. They’re usually gold traders. You can also see the influence of MI sponsors when they called together a “conference” on immigration and decided that the real libertarian position on immigration is that it should be state controlled!
Another example of sponsor influence is how LRC will usually say that big business and the state are often indistinguishable, and usually rail against corporations getting handouts from the government etc. but yet when Amazon.com became the arm of the state to shutdown wikileaks, LRC gave Bob here a nice sack with a dollar sign to write about how Amazon.com did nothing wrong.
This isn’t to say that the work that MI and LRC and other libertarian think tanks are doing isn’t good for anything, I think its very good and has been a great service to me and the way I think. But to say it isn’t corruptable or has not yet been corrupted is very naive.
See with your eyes, not with your heart.
Avram wrote:
…LRC gave Bob here a nice sack with a dollar sign to write about how Amazon.com did nothing wrong.
What exactly are you saying by that? I’m not up on my hipster slang. Can you state in plain English what you are saying?
Apologies.
What I was trying to say: “Robert Murphy writes an excellent argument, and I think LRC hired his services to do a few peices on why a good libertarian shouldn’t be angry at Amazon.com when they stopped hosting Wikileaks”
Furthermore my argument is that this was inconsistent with prior LRC sentiment towards other corporations (say DARPA) that act as utility to the government, and, moreover, I suspect that if any company but Amazon (LRC’s main source of revenue) did the deed, LRC would be all over it.
Just so you know, I still use Amazon and read LRC, but the reaction LRC had to that event struck me as a really obvious sell out (for lack of a better or more accurate term.)
DARPA isn’t a corporation (in standard usage); it’s a government agency that (like other agencies) awards contracts, some of them to corporations.
Bob’s position on Amazon (which I agree wth) was that libertarians shouldn’t punish Amazon for what they did, since “what they did” was cave to government pressure that they not provide hosting to WIkileaks. Such caving is no different than when libertarians agree to do things for the government under coercion, like pay taxes.
It might be noble to go to prison defying unjust government policies, but we shouldn’t condemn those who don’t.
Also, it’s not that Amazon was inhibiting WIkileaks, they just ceased hosting them — which was more than any other major corporation was doing _for_ them in the first place. To punish Amazon for caving is to create another case of “no good deed goes unpunished”.
I’m not going to dig up the links to Bob’s articles, since we should be talking about whether Bob’s conclusion is correct, not whether we can play gotcha with statements he’s written in the past.
Right this is a good summary of my views. And actually, my first article was more along the lines of, “So far, nobody has convinced me that Amazon did anything they themselves aren’t doing, since they continue to pay taxes.”
Avram,
That’s what I thought you were implying. I get paid jack squat for LRC articles.
I will let people draw their own conclusions about who benefits from those articles etc. etc. But I didn’t get anything for writing those defenses of Amazon. I personally use Amazon about once a year. That’s what was so funny about it, is antiwar people were peeing and moaning about the sacrifice of giving it up, and I was telling them they didn’t have to (when for me it would have been no sacrifice).
Of course it helps my career in general to have stuff on LRC, it sells books probably (if they feature them), etc., but I certainly didn’t get paid to write those articles. Since you confidently asserted otherwise, I decided to call you out on it.
Bob,
You’re right to tell me off on the payment thing.
But I’m not going to back down from this.
Look, you could have, of course, just been asked to do a peice, but that doesn’t change the hypocricy of the situation. Moreover I *do* think that your arguments sincerely represented your beliefs, but not even that changes anything.
The fact is that if it weren’t Amazon.com, you wouldn’t have written any apology at all.
And so you know, I’m not saying this because I am outraged with what Amazon.com did to wikileaks, or because I wanted to boycott them or anything. On the contrary, I lean on your side of the argument.
I’m saying this because even if I agree with you, its really really obvious that LRC went into full defense mode of Amazon.com as soon as other libertarians (LRC readers) had some reason (bad, good, it doesn’t matter) to stop buying Amazon goods, and that usually when a company does something like this LRC goes into attack mode.
The behavior of the institution and the individuals that make it up was altered because of financial ties.
At least I think it was you who defended Amazon? It was a while ago and I could be wrong.
No it was me. And I actually believed what I wrote, and got paid nothing for doing it. In fact I got a bunch of people accusing me of selling out etc.
Well what did you expect?
I’d feel more sorry for you if you took the time to do a search for “Big Business” on LRC, and then wrote an article defending each and every one of the corporations the articles / blog posts rail on and on against.
But you won’t, and as much as you will never admit, it is because your affiliates aren’t getting revenue from Rapiscan or Microsoft, but they are from Amazon.com.
Being a gold trader and being a member of “the gold lobby” are two very different things.
I trade in dollars. Am I a member of the Federal Reserve lobby? Nobody told me about it.
when they called together a “conference” on immigration and decided that the real libertarian position on immigration is that it should be state controlled!
Prove it.
Another example of sponsor influence is how LRC will usually say that big business and the state are often indistinguishable, and usually rail against corporations getting handouts from the government etc. but yet when Amazon.com became the arm of the state to shutdown wikileaks, LRC gave Bob here a nice sack with a dollar sign to write about how Amazon.com did nothing wrong.
So saying big business is often indistinguishable from the state means that Lew can never defend any big businesses? Often is not the same thing as always.
“Nobody is claiming the market would choose gold for certain. But the likelihood is astronomically high.”
Historically, afaik, there have always market forces away from gold and towards more convenient means of exchange — be it copper or silver or paper. For example I don’t think that, today, eftpos would be replaced by gold coins if competing currencies were allowed. I think its far more likely that if precious metals play a part at all they would just become backing or reserves and people would go around trading precious metal derivatives.
Just as or even more likely though (at least in the short term) is different banks issuing their own bank notes backed by nothing that would float against eachother.
Historically, afaik, there have always market forces away from gold and towards more convenient means of exchange — be it copper or silver or paper
Sure, like for instance relatively low value exchanges like necklaces and bread. But copper and silver were not as universal as gold, which is why gold has historically been the money. Sort of like nickels being used today even though the dollar is the standard.
Paper has not historically been money, although it was used as a transferable claim to money.
Gold is the mother of all currencies. Any country or bank that ignores this fact is pre-destined to collapse. People and empires that move away from God’s ways do not last very long.
In general, everybody, some of the comments on this thread are hilarious for their explanations of what “really” drives organizations in which I participate. I probably do the same thing; I’m sure Daniel Kuehn can tell us that at leftist think tanks the rank and file don’t sit around saying, “How can we put out more global warming propaganda, to give more power to our overlord Soros?”
As I have made abundantly clear, I am a Christian and that means I think we are all fallible, and that there is a devil who is using all of our weaknesses to further his own nefarious plans. So that’s why a very healthy thing to do is cut others some slack and focus on your own faults. (And yes I need to do that myself in my own life–that’s the whole point.)
OK I’ll get off the soapbox now, thanks for your attention.