Gold Money Apparently Existed Before the Big Bang
It is hilarious to me that even the harshest critics of the Mengerian account of the origin of money, end up relying on anthropological evidence that is in total agreement with his story, and makes little sense with the rival State narrative. For a recent example, consider the following extraordinary passage from Ambrose Evans-Pritchard:
It is a myth – innocently propagated by the great Adam Smith – that money developed as a commodity-based or gold-linked means of exchange. Gold was always highly valued, but that is another story. Metal-lovers often conflate the two issues.
Anthropological studies show that social fiat currencies began with the dawn of time. The Spartans banned gold coins, replacing them with iron disks of little intrinsic value.
Does anyone else see the problem with those last two sentences?
It sounds like Ambrose Evans-Pritchard had the work of David Graeber explained to him, possibly in a bar, and then tried to regurgitate it the best he could.
When I read the article this hypothesis also crossed my mind.
Now that’s funny.
Actually no, it’s tragic. This is how intellectual poison spreads, ladies and gentlemen.
Another nonsense from the article:
“Anthropological studies show that social fiat currencies began with the dawn of time. The Spartans banned gold coins, replacing them with iron disks of little intrinsic value.”
So first people used gold as money, then the state performed the fixed-exchange-rate-trick (AKA Gresham’s Law), and replaced it with something else. That sounds familiar.
Maybe I am missing something, but why did you preface your post with “Another”? Murphy quoted that exact same passage.
Sorry my fault.
That’s not contradictory.
Social fiat currencies came first.
Then, many governments minted gold coins to reduce barter costs.
The Spartans rejected this practice and either banned money or came up with another system in some cases.
Nowhere does he say people were using gold coins first.
Social fiat currencies came first.
Anthropological evidence dating back to ancient Sparta shows that gold coins came first, and the state banned them.
Then, many governments minted gold coins to reduce barter costs.
Why would they mint gold coins, rather than chicken livers, or rocks?
The Spartans rejected this practice and either banned money or came up with another system in some cases.
They rejected their own practise?
Nowhere does he say people were using gold coins first.
See the last quote where he said the Spartan state banned gold coins.
So this guy thinks ancient Sparta is the beginning of civilization? It’s not even technically pre civilization.
This guy used Sparta as his example behind the assertion that “fiat currencies began at the dawn of time.”
Before the Spartans banned gold coins, they used their chest hair as social currency.
That would explain something I noticed in a movie, once.
(They appear to have been against hoarding, in case you were wondering. Typical statists.)
successfulbuild, I can’t believe you’re saying this. That sentence is completely extraneous if you try to interpret it the way you are.
No no no, Bharat, look over HERE! See that? Wavey hands over here!
The whole problem is the idea that credit supposedly exists before money. If this is the case, it must be barter credit – give me your 20 chickens today, and I will give you 2 pigs in a month. This is still barter, and still dependent on the double coincidence of wants. (If I don’t want 2 pigs in a month, I still won’t give you 20 chickens now.) Any indirect exchange, no matter how displaced temporally, must rely on a medium of exchange.
An example would help, I think. Let’s say I want 2 pigs in 2 months. But the 20 chickens I have now are only desired by the silver miner. The pig farmer desires silver for jewelry. Thus, I could trade the 20 chickens for 10 ounces of silver paid in 1 month, and then promise the pig farmer the silver in 1 month for pigs (now or then, or even later still – this doesn’t matter). This is clearly a credit transaction – but also dependent on the medium of exchange to solve the double coincidence of wants.
In short, “credit” is not a single thing that is separate from barter and indirect exchange. It is merely a temporally displaced form of either barter or indirect exchange.
That was exactly my criticism when Graeber’s book first came out, and socialists were coming out of the woodwork claiming that credit transactions preceding money somehow disproves the barter to money theory of money.
You obviously didn’t read the book. The trade didn’t go down, you give me 20 chickens and I will give you 2 pigs. The trade went down by him giving me 20 chickens, and then I owe him a favor to be repaid in a future, because he knows in the future he is going to need help.
Yes, that is a credit system. No, it doesn’t have anything to do with the double-coincidence of wants.
” The trade went down by him giving me 20 chickens, and then I owe him a favor to be repaid in a future, because he knows in the future he is going to need help.”
Either the favor will be his pigs later, labor, or an indirect exchange. The favor, even if undefined at the time of initial transaction, is still either barter or indirect exchange. And the double coincidence of wants issue still exists insofar as the favor must be one that can be provided – without money and indirect exchange, should it not yet exist.
Typically, libertarians are incompetent even in trying to paraphrase what Graeber wrote:
(1) Graeber is quite clear that money can emerge in multiple ways, that it can sometimes emerge by barter spot trades, but has also emerged by planning and design in, for example, temple authorities in ancient Egypt and Mesopotamia. he also notes how money can arise through non-commercial, social currencies as well.
(2) it is also interesting how Austrians over the decades have ignored this rather more subtle view of Menger:
“It is not impossible for media of exchange, serving as they do the commonweal in the most emphatic sense of the word, to be instituted also by way of legislation, like other social institutions. But this is neither the only, nor the primary mode in which money has taken its origin.” (Menger, C. 1892. “On the Origin of Money,” Economic Journal 2: p. 250).
1) Graeber is wrong in claiming that planning and design can – or even has – resulted in money. As individuals, the planners can choose to use a certain medium of exchange (for all the same reasons other individuals do), but they cannot create something out of thin air to use as such.
2) Menger was not God, and his analysis is therefore not perfect. His “more subtle view” is not ignored, but disputed as an error, in the same fashion as Rothbardian analysis disputes Mises’ view on monopoly (and, parenthetically, seemed to have changed Mises’ mind). A mere quote from a previous Austrian thinker does not a case for their view make – your argument from authority is recognized as nonsense (like the rest of your arguments).
” And the double coincidence of wants issue still exists insofar as the favor must be one that can be provided
It exists but is significantly mitigated, which is the point you miss.
Even Robert Murphy agrees:
In a crucial passage, Graeber says:
> “[T]he flaw in the barter theory of the
> origin of money is that barter presumes
> SPOT TRANSACTIONS. There is no reason
> whatsoever to presume that neighbors would
> limit themselves to spot transactions in
> dealing with one another. However, if one
> does not presume spot transactions, then
> the notorious problem of the “double
> coincidence of wants” does not occur. You
> end up with a system of broad,
> non-enumerated credits, and this is
> precisely what those who actually did
> research on communities that do not use
> money did find.”
This is an excellent point, and Graeber is right: In the standard exposition of a barter economy, economists typically think in terms of spot transactions. But in principle, there’s no reason to restrict ourselves in this way. If we can imagine a farmer trading a pig for an axe, we can also imagine a farmer trading a pig for a promise to deliver an axe in two weeks.
Graeber is also right that the possibility of credit transactions expands the scope of a moneyless economy, and mitigates the problem of finding a double coincidence of wants.
http://blog.mises.org/18371/murphy-replies-to-david-graeber-on-menger-and-money/
“It exists but is significantly mitigated, which is the point you miss.”
It is temporally displaced, to be dealt with later. When the favor is called in, the double coincidence of wants reappears – anything that is not held by the debtor requires it to be dealt with. The mitigation does not change the core analysis.
Your quote of Murphy, again, does not demonstrate how credit can be used as money without an underlying medium of exchange. Temporally displaced barter is still barter until such a medium of exchange is brought forth from the use of it as a highly salable barter commodity used for indirect exchange.
“e. The favor, even if undefined at the time of initial transaction, is still either barter or indirect exchange.”
Wrong. The trade may have even been something like a guy giving someone his stuff in order that they’ll be better friends in the future, so that he can help his son marry the guy’s daughter.
How in the hell is that a “bartering” exchange? Nothing from the other guy is being “bartered.” That’s an exchange based on building cooperative networks and networking effects.
He is bartering stuff for friendship. Or it’s charitable giving, followed by a separate friendship – presuming, I think rightly, that friendship cannot be bought. It certainly has nothing to do with money. Or even catallactics in the normal sense at all.
It certainly does not have any bearing on my argument.
What you just described is barter! Which is consistent with the Mengerian barter theory of money
I want chickens, he wants a favor.
” The trade went down by him giving me 20 chickens, and then I owe him a favor to be repaid in a future, because he knows in the future he is going to need help.”
That describes a completely Austrian catallactic exchange. Just like with LK or Krugman, we have desperate statists taking Austrian concepts out of context and splitting non-existent hairs.
The first thing I noticed about Graeber’s accounts of ancient informal barter/credit transactions was how they were purely Austrian in that the parties were exchanging stuff based upon their subjective valuations. This clearly preceded state coinage. Of course, the items exchanged are not precisely “equivalent” or else the transaction would have never taken place. Each side apparently valued what was received over what was traded away. Duh. I somewhere recall Graeber latching on to the informality of the trades and their lack of “equivalence” as refuting Menger. That’s a sign of Graeber’s desperation. He was desperate to promote a “state theory of money”.
It appears that states were probably later involved in producing uniform coinage and price controls over their realms. Big deal. Catallactic exchange was there from the beginning of human beings and state coinage and price controls grew out of that.
I don’t think Graeber is equating credit with money. In fact, his purpose is to show how money finds its origins with the State. Rather, Graeber is saying that while the private sphere used advanced methods of barter, the State developed money and this was gradually integrated into society.
I don’t think he is equating credit with money either. But in claiming that no barter economy ever existed, and instead it was a credit economy based on favors, he ignores that this is still barter.
His historical account of the state creating money is just absurd, for all the same reasons that the Mengerian account was accepted in the first place. No state can create money from anything that does not already have barter value according to the market, or in any way other than in its existence as a market participant (i.e. its buying and selling operations for materials and necessary economic goods – arms, food, labor, etc.). No totalitarian state can create money at all.
From my reading of Graebers book he says that all “none-money” trade is not barter. So he considers the favor-credit system as a form of money (no state-like entity involved).
Insofar as he claims this, he is utterly in error. Credit can be classified as barter credit (trade X for Y later) or “money credit” (trading an indirect medium of exchange for X, in either order) – which is STILL technically barter.
The state can only influence the creation of an indirect medium of exchange insofar as it buys and sells things on the market (i.e. does not act in accordance with its character as a coercive entity).
Imagine a credit exchange that is finalized over 1 year.
Then 1 month.
Then 1 day.
Then 1 hour.
Then 1 minute.
Then 1 second.
Then 1 millisecond.
All “spot” trades are actually credit (i.e. trusting the counter-party to make good on their end of the exchange) exchanges. The only difference is the length of time it takes to finalize an exchange.
If Graeber is talking about credit transactions of sheep for cows, he is just referring to a prolonged barter transaction where the millisecond of trust turns into 1 second, 1 minute, 1 hour, 1 day, 1 month, 1 year, etc.
“All “spot” trades are actually credit (i.e. trusting the counter-party to make good on their end of the exchange) exchanges. The only difference is the length of time it takes to finalize an exchange.”
No, they are not.
Spot trades are sale and purchase agreements, not credit transactions.
The spot trade is direct exchange of one commodity for another, in an exchange where the things are agreed upon and accepted by both parties. Ownership of the object you’ve bought passed to you when bought it (made the payment of the price agreed). Once ownership has passed there is no credit/debt relationship.
You have not extended credit to the seller. He is not your debtor.
The seller has no debt to you, even if a short time might pass before actual delivery occurs. The time element you stress is nothing but a red herring.
The seller merely has a legal obligation to deliver your property, once bought.
A debt/credit relationship, by contrast, is where I have lent a person a good as a mutuum: he is now my debtor.
This is a not sale-purchase agreement.
And you have missed the other important fact required in Graeber’s examples: many creditors or parties in gift exchange have not even yet decided what they want back from their “debtor”. They will call in their debt at some point in the future, and the debtor may not even know what will be demanded.
“Ownership of the object you’ve bought passed to you when bought it (made the payment of the price agreed). Once ownership has passed there is no credit/debt relationship.”
Still a credit transaction – just a very short one. This argument isn’t new – it’s a correct variant of the (false) one advanced to justify FRB as a loan to the bank.
“many creditors or parties in gift exchange have not even yet decided what they want back from their “debtor”. They will call in their debt at some point in the future, and the debtor may not even know what will be demanded.”
If they demand what the debtor already has, it is temporally displaced barter. If they demand what he does not, and he must trade to obtain what is needed to pay off his debt, it is indirect exchange and contributes to the creation of money in accordance with the Austrian account.
“>Ownership of the
> object you’ve bought
> passed to you when
> bought it (made the
> payment of the price
> agreed). Once
> ownership has passed
> there is no credit/debt
> relationship.”
Still a credit transaction – just a very short one.
No, it is not.
In so sense is this a a credit transaction: it is direct sale and purchase, or direct transfer of property rights.
Major_Freedom incompetently misses the essence of both barter spot trade and sale and purchase.
http://socialdemocracy21stcentury.blogspot.com/2012/10/spot-trades-are-not-credit-transactions.html
You made a nice blog post that said literally nothing. Yes, a credit transaction occurs where property rights are transferred only upon final payment. The only difference is that a spot trade involves only one payment and a very short time. There is no reason why this cannot be looked at as a credit transaction.
“the failure of a debtor to repay debt is not theft, but merely breach of contract”
No, it’s theft. If I take out a car loan and don’t pay back the loan, but keep the car, I have literally stolen the car. Breach of contract is a form of fraud and theft.
“If I take out a car loan and don’t pay back the loan, but keep the car, I have literally stolen the car.”
No. LITERALLY you have stolen the loan. And it’snot just pedantry to point that out, as your victim may be a different person.
“Does anyone else see the problem with those last two sentences?”
Yes, it contradicts Hollywood. When Leonidas climbed to the top of Delphi to reach the Ephors he dropped them a large bag of gold.
The gold standard is one gigantic government program. It has never existed outside of government enforcement. The credit-debt system existed first and then governments adopted, and gold coins were first minted by governments according to Cartalist theory. Setting the value of gold is also a government action.
Facts are facts. What Austrians advocate is the equivalent to cutting off everybody’s left arm in the name of properly “constraining” the economy. But it’s even worse than that, because at least if the government cut off everybody’s left arm, it would slow down everybody equally. The gold standard is designed to give corporatists an advantage over the rest of society, but as Thomas Jefferson said any system that is tyrannical should be overthrown and that is why there is no longer a gold standard.
Wow.
I think that about sums it up. Dude is about as crazy as LK.
I disagree. LK is able to make logical arguments, and you can (I don’t say you will always) have a meaningful conversation with him even if you think he is exasperating and finally wrong..
Maybe side by side with successfulbuild it appears that way.
LK’s arguments tend to be based in positivist empiricism, which denies the existence of a priori knowledge, while presupposing the existence of a priori knowledge (such as the constancy principle). His arguments are, at their core, as self-contradictory as successfulbuild – just a bit more academic-sounding.
How to rile a positivist:
Ask them to prove the concept of observation without using circular logic.
For my part I do see a big difference in the quality of reasoning between them. It is one thing to have a wrong premise or being not even able to understand simple concepts as money certificates, and think that free banking is totalitarian, Linux is somehow unexplainable by Austrians, sometimes just adding up randomly good sounding words like in “social fiat money”, etc..
I mean just look up what he said about the ancient Sparta above..
http://ozhouse.wpengine.netdna-cdn.com/files/2012/09/double_facepalm.jpg
You are incompetent and haven’t been able to back up a single one of your points.
Ok, what agency is going to universally set the value of a “gold dollar” so that it equals so much in gold. It would have to be THE government who did that, especially if you have a universal standard across the country.
@ SB
One last time:
You go to a warehouse. Then you give an amount of X of the good Y to it. The warehouse gives you a note, which says that when you bring this note back to them that you can claim with this note an amount of X of the good Y from them.
Where do you need the government for this, where is the price fixing?
(1) I am not a logical positivist, and pure logical positivism has long since ceased to be a serious philosophical position on epistemology. That you attack it above as if modern empiricists are all stuck in the 1930s shows how much you’re ignorant of philosophy.
(2) A moderate empirical approach to knowledge does NOT deny that things can be a priori true:
E..g, how do you know the statement “all bachelors are unmarried” is true: it is true by virtue of the terms/definitions used, a priori, without any need to empirically check whether all bachelors are married.
Even the modern empiricist Karl Popper did not deny the existence of a priori knowledge:
“But I am going much further than Kant. I think that, say, 99 per cent of the knowledge of all organisms is inborn and incorporated in our biochemical constitution. And I think that 99 per cent of the knowledge taken by Kant to be a posteriori and to be ‘data’ that are ‘given’ to us through our senses, is in fact, not a posteriori, but a priori.”
Popper, All Life is Problem Solving, p. 70.
If you want to engage with modern philosophers who critique a priori knowledge, it’s the ideas of van Quine,not A. J. Ayer, that you would need to engage in.
“A moderate empirical approach to knowledge does NOT deny that things can be a priori true”
It assumes that these things are, as you say, tautologies that convey no useful knowledge.
You claim to not be a logical positivist, but your arguments so often rely on apparent empirical evidence as an attempt to refute a priori true knowledge. What else would you call that?
Your appeal to Popper as saying something new is erroneous. It is precisely the Popperian view that is being attacked here. A priori knowledge is not only useful and true, it is the only sensible method to analyze the social sciences.
“A priori knowledge is not only useful and true, it is the only sensible method to analyze the social sciences.”
And yet that view is not even accepted by all Austrians. In fact, many modern neo-Austrians have tended to follow Hayek in rejecting Mises’s pure apriorism:
http://socialdemocracy21stcentury.blogspot.com/2011/05/hayek-on-mises-apriorism.html
http://socialdemocracy21stcentury.blogspot.com/2010/10/mises-praxeology-critique.html
The notion that apriorism is an unsound method for the social sciences and economics does not make one a “logical positivist”.
“And yet that view is not even accepted by all Austrians.”
So what? Your appeals to authority are really grating. I don’t particularly care what certain individuals say or said. I care about whether their arguments make sense, or are flawed. Hayek’s tend to have subtle flaws that weaken his arguments, and his social philosophy is so muddled and confusing as to be – like Friedman’s – a supposed laissez-faire socialist democracy.
“The notion that apriorism is an unsound method for the social sciences and economics does not make one a “logical positivist”.”
The contention can only be that the logic is unsound, or that a priori knowledge cannot tell us anything about the real world. The former case requires logical (not empirical) arguments to refute Mises/Rothbard, and the latter implicitly refutes any sort of empiricism whatsoever, regardless of whether you call it “positivist” or not.
Actually, all we’ve heard from the Mises Institute team here is conspiracy theories and a bunch of nonsense (like that Zimbabwe “collapses” because of fiat currency rather than policies caused by the IMF), that gold coins minted by the early American colonists existed without the government (in the colonies laws and grants had to be passed by the local legislature which were modified by an upper assembly, the local proprietor or Royal governor or even the King of England in some cases, this, of course, applied to the minting of coins as well), and that gold coins first appeared in Sparta (which they did not).
“gold coins minted by the early American colonists existed without the government”
Christopher (alias Christian) Bechtler (1782–1843) was a German-born American goldsmith and watchmaker. He became rich and famous through an American gold rush based on his concept of producing defined gold dollars, the Bechtler Dollars, in the early 1830s and by 1840, before the US government itself started to produce gold dollars in 1849.
“Thomas Jefferson said any system that is tyrannical should be overthrown and that is why there is no longer a gold standard.”
Thomas Jefferson also said this: “Specie [gold and silver coin] is the most perfect medium because it will preserve its own level; because, having intrinsic and universal value, it can never die in our hands, and it is the surest resource of reliance in time of war.”~Letter to John Eppes, 1813
…..and this: “Paper is poverty,… it is only the ghost of money, and not money itself.”~Letter to Edward Carrington, 1788
also this: “Experience has proved to us that a dollar of silver disappears for every dollar of paper emitted.” ~Letter to James Monroe, 1791
Shhhh, WE HAVE AN AGENDA TO SPREAD!
Look up fraudulent conveyance. Basically before fraudulent conveyance creditors could make loans and call in the loans at any time, and then take the property of the people they made loans to, such as the farmers in upstate New York. In those days the poor actually favored a fiat currency system.
Jefferson favored the poor and the independent farmer. He would have eventually opposed the gold standard when it ran up against its natural constraints. In fact, Jefferson also opposed deflation;
”
Anyway, what’s interesting is that inflation was not always seen as the enemy of the common people. When Thomas Jefferson railed against banks, he worried about deflation as much as inflation. And in the 1800s, the Populist Movement – basically, a bunch of small farmers in the South and West – fought for inflation! At that time, farmers owed a bunch of money to big banks on the East Coast (including J.P. Morgan, who was presumably busy kowtowing to his secret immortal Rothschild masters). Without inflation, they would have to sell their farms to the banks and go be factory workers. So they fought for the United States to go off the gold standard and go on the silver standard – debasing the currency in order to reduce their debts! ” –Noahpinion blog
Those who are in debt will always be fans of inflation, and those who save will favor deflation. Perhaps we can agree that the solution to this tension must involve accounting for our debts in units not subject to political manipulation.
You are using calling back a loan before the term is over against gold money? That has nothing to do with whether money is gold or not.
The quote’s link Noah links to itself says the quote is bull.
Jefferson died in 1826. The Populist Movement wasn’t until the late 1800s.
Not every poor person. You are saying “the poor” like they are some monolithic organic blob with no individual preferences.
Let individuals decide for themselves what money to use, rather than having it forced on them by the state.
“ He would have eventually opposed the gold standard when it ran up against its natural constraints.”
Gotta love the psycho-analyzing from know-nothings.
The gold standard is one gigantic government program. It has never existed outside of government enforcement.
Except for the private minters in US territory prior to (and subsequent to) 1776.
The credit-debt system existed first and then governments adopted, and gold coins were first minted by governments according to Cartalist theory.
…which is wrong.
Setting the value of gold is also a government action.
No it isn’t. I value 1 ounce of gold to be worth about a nice Armani suit. You may disagree, but that is my valuation. Others set their own values, and where there is an offsetting ranking of value, exchange is possible.
Facts are facts. What Austrians advocate is the equivalent to cutting off everybody’s left arm in the name of properly “constraining” the economy.
No, we advocate for letting people keep their arms and determine what arms to use and when. If they want to use gold arms, let them.
You socialists want to cut off everyone’s legs to save their arms.
But it’s even worse than that, because at least if the government cut off everybody’s left arm, it would slow down everybody equally. The gold standard is designed to give corporatists an advantage over the rest of society
It’s the exact opposite. It restores the power in individual’s hands, because no state and no corporation can create gold out of thin air.
but as Thomas Jefferson said any system that is tyrannical should be overthrown and that is why there is no longer a gold standard.
No, there is no more gold standard precisely because a tyrannical system of fiat took over, which put the production of money into a monopoly, which privileges the very corporations you’re railing against like a floundering fish.
yes. Under your totalitarian nightmare, the value of the gold is set by a government agency, so one ounce of gold is worth so much, and then every thing else in society has to be re-valued in terms of that gold standard.
That is why it is tyrannical and a failure and about force. It forces people into a failed system..
“The value of the gold is set by a government agency”
You really don’t know where you’re posting, do you?
“Under your totalitarian nightmare, the value of the gold is set by a government agency, so one ounce of gold is worth so much”
No – a certain piece of paper is a property title to a specified amount of gold. The value is not set by anyone, and neither is the “price of gold”. To claim otherwise is to claim that your car title sets the value of your car, or your deed to your house sets the value of your house.
Also, there are no government agencies that set this, according to virtually anyone here. Only individuals that print out some banknotes and offer to redeem them for the gold they stand in for.
So what you’re essentially saying is that different “agencies” will set different standards for their “gold dollar?” So company x will say that 1 dollar is equal to 5 ounces of gold and another company will say that 1 dollar is equal to 10 ounces of gold?
That’s not what Rothbard advocated. he said every gold dollar should be worth the same amount.
And there’s still a lot of force in your system. You think that private property is magically given to any gang of thugs who happen upon it. Then, they can make any rule they wish upon the property, such as allowing slavery. In Somalia, some property owners actually prevent people from holding hands. There would be no democratic input in your system, so it’s totalitarian.
By the way what do you do for a living? I’m guessing you’re some Libertarian troll with no education.
“So what you’re essentially saying is that different “agencies” will set different standards for their “gold dollar?” So company x will say that 1 dollar is equal to 5 ounces of gold and another company will say that 1 dollar is equal to 10 ounces of gold?
That’s not what Rothbard advocated. he said every gold dollar should be worth the same amount.”
They wouldn’t call their currencies by the same name, but essentially yes. Rothbard’s advocacy was for if we have a single monopoly organization, that it too should be required to set its currency as a physical amount of gold instead of innumerable paper tickets.
“You think that private property is magically given to any gang of thugs who happen upon it. Then, they can make any rule they wish upon the property, such as allowing slavery. In Somalia, some property owners actually prevent people from holding hands.”
LOL. No. That isn’t the argument at all.
“By the way what do you do for a living? I’m guessing you’re some Libertarian troll with no education.”
I am a software engineer with a large corporation. I have, in all likelihood, more education than you. That much is evident from your failure to understand the structure of an argument, and your constant straw man attacks on libertarian thought.
Under your totalitarian nightmare, the value of the gold is set by a government agency
Actually it is under your toalitarian nightmare that money is set by a government agency. Fiat means “by decree”.
Under my preferred system, individuals are free to choose for themselves, subject of course to the choices of other individuals for themselves. I favor a free market in money, not gold imposed by the state. I just suspect that gold will be the money of choice when people are free to choose.
It is precisely FIAT standards that forces people into a failed system.
Which is why no country in the world currently using a gold standard…. And every monetary system in history has been backed up by government laws and regulations.
What you favor is candy unicorns and fairy tales. No one will every implement your system because it’s stupid and self-contradictory.
What about the coat-check standard?
Didn’t you rob the coat check room and replace them with promises, to expose some monetary crank?
“Does anyone else see the problem with those last two sentences?”
Yes, it contradicts Hollywood, that’s how I know he’s wrong. When Leonidas climbed Delphi to reach the Ephors he dropped them a large bag of gold.
@sb
Even were you right that the gold standard was both state influenced and tyrannical, it doesn’t follow that what exists is not also state influenced and tyrannical.
It is a fallacy to recognize some bad quality in X, see the Y is not X, and therefore conclude Y does not have that same bad quality.
Maybe it does, maybe it doesn’t, but the state of not being X isn’t enough to tell you that.**
** Any more than the fact Jefferson said something should be overthrown is /why/ it is overthrown, for that matter.
I am right about the gold standard. That’s why Robert Murphy can’t name an anthropologist who documents a gold standard without any state intervention. Early humans had no concept of even capitalist property rights, let alone a gold standard.
“It is a fallacy to recognize some bad quality in X, see the Y is not X, and therefore conclude Y does not have that same bad quality….”
Yeah, that’s what I did. In fact, I didn’t even mention the current system. However, the current system is more natural and more in line with human nature and documented human systems than the gold standard system.
It should be pointed out that the closest thing to full reserve gold standards in the modern world lasted only for a short period, between about 1870 to 1880 to 1914. It was one of the shortest monetary systems to ever exist and a gigantic failure. After Britain re-implemented a gold standard after the War, it didn’t do much to erase government debt and was also a failure and an unnecessary constraint. These systems failed because they are so far removed from any thing that is natural.
And of course anthropologists will bring up numerous other reasons why the gold is a failure such as the difficultly in transporting it and the difficulties ancient societies had in valuing raw metals.
I am right about the gold standard.
No, you are wrong about the gold standard.
That’s why Robert Murphy can’t name an anthropologist who documents a gold standard without any state intervention.
Graeber.
Early humans had no concept of even capitalist property rights, let alone a gold standard.
They didn’t need advanced knowledge over capitalist economics to agree to hold gold as a store of value, to make future exchanges.
“It is a fallacy to recognize some bad quality in X, see the Y is not X, and therefore conclude Y does not have that same bad quality….”
Yeah, that’s what I did. In fact, I didn’t even mention the current system. However, the current system is more natural and more in line with human nature and documented human systems than the gold standard system.
You are misusing the word natural. If state monopoly (which is our current monetary standard) were “natural”, then totalitarian communism would be the most “natural” to you.
Sure, maybe to YOU totalitarianism is “natural”, but not to those of us who aren’t insane.
It should be pointed out that the closest thing to full reserve gold standards in the modern world lasted only for a short period, between about 1870 to 1880 to 1914. It was one of the shortest monetary systems to ever exist and a gigantic failure.
It wasn’t a gigantic failure just because you claimed as much. It was in fact abandoned, because of ruthless thugs who wanted to spend more than they earned. Excuse me, because of “natural progression of human society”, lol.
After Britain re-implemented a gold standard after the War, it didn’t do much to erase government debt and was also a failure and an unnecessary constraint.
That’s because they enforced the old redemption rate, after they inflated paper. That isn’t a failure of gold, that is a failure of government honesty.
These systems failed because they are so far removed from any thing that is natural.
So anything that fails is “unnatural”? Then behold fiat money, in which case every single attempt in history, has eventually failed. Even according to your own nonsense, your claims are rejected.
And of course anthropologists will bring up numerous other reasons why the gold is a failure such as the difficultly in transporting it and the difficulties ancient societies had in valuing raw metals.
Transportation costs? Oh so that’s why we are now on digital food.
Gold isn’t valued in a gold standard. Other goods are valued in gold.
Gold doesn’t need to be physically transported to fulfill all exchanges, BTW, just like dollar bills in a fiat system aren’t always physically exchanged in every transaction.
No society in history has failed because of fiat money. Every society, however, has succeeded or failed due to its response to environmental factors (Diamond, collapse) of their society. A nations resilience and fragility is large due to the environmental factors.
However, the gold standard did fail, and was quickly replaced. It didn’t cause a collapse because people realized it itself was the problem. That is a different from a collapse.
“No society in history has failed because of fiat money. ”
Except for Weimar Germany, Zimbabwe, China ( Marco Polo wrote on China: “The best families in the empire were ruined, a new set of men came into the control of public affairs, and the country became the scene of internecine warfare and confusion” as a result of paper currency), France with John Law’s experiments, Argentina, Mexico, and Russia in the 1990s, and so forth. Societies have been brought to heel because of currency collapse over and over under fiat money.
Dude, you forgot the Hungarian inflation of 1946. Hungarian excellence in mathematics allowed them to achieve fiat currency denominations far and above any other failed state… reaching numbers that modern Americans would call an “octillion” — that’s presuming any modern American could actually cope with such concepts, and presuming there even is such a thing as an octillion.
They even tried to create an inflation-proof currency that automatically adjusted to inflation (sounds familiar) which also failed.
You owe those noble Hungarians an apology because they are the world frontrunners in inflationary insanity.
Sorry to be so blunt, but you are as ignorant of history as you are of economics.
However, the gold standard did fail, and was quickly replaced. It didn’t cause a collapse because people realized it itself was the problem. That is a different from a collapse.
Gold didn’t fail, any more than peace fails. Gold was abandoned. The fact that humans can choose gold or not gold, peace or no peace, does not mean gold or peace are “failures” when they are not chosen.
By your own garbage logic, the dozens upon dozens of failed fiat currencies throughout history is in and of itself proof that fiat is a failure.
Those were not societal collapses. A collapse is defined by a drastic reduction in population. None of those were societal collapses and that is just a conspiracy. Germany DID have a drastic reduction and its population AND a complete restructuring of its social system, but that was AFTER the Weimar republic.
And the problem with Zimbabwe was that they spent their new currency trying to pay down their debt. That is not a problem with currencies per se but with the way the IMF and the World Bank operate.
What the IMF does is it loans to poor countries for them to spend on American corporations constructing projects and so on. They then become ensnared in debt and are often forced to engage in more privatization schemes and so on.
So the failure of the Zimbabwe was more a failure of international trade than its own currency.
The other examples are social restructuring. They are not “collapses” and an anthropologist would laugh at your stupidity.
Somalia, which has had similar monetary systems to the gold standard, and also problems with trade, however, did COLLAPSE. They had a drastic reduction in population.
So Major_Freedom and Tel just promoted conspiracy theories, not hard evidence of any collapse.
Minor political social restructuring is not a “collapse” of civilization.
“Early humans had no concept of even capitalist property rights”
The Neolithic Revolution, and the population boom that it allowed to exist, was based on the switch from hunter-gatherer “no property beyond personal belongings” society to that of “capitalist property rights” in agriculture and animal husbandry….
As i never tire of pointing out, no anti-Austrian understands economic calculation. At the same time, no anti-libertarian seems to understand the non-aggression principle. You’d think this clown [successfulbuild] would have some shame. But you would be wrong.
“As i never tire of pointing out, no anti-Austrian understands economic calculation. A”
So says the fool who just had his 4 big *alleged* economic calculation problems listed by a Keynesian.
Dream on.
None of those “4 problems” is the one referred to in the context of Keynesianism.
You’re deluded.
Setting the value of gold ?!?
A gold coin has always had exactly the value of one gold coin. Everything else was measured in value compared to that.
At any rate, silver coins have always been the fare for the common folk. Silver for exchange — gold for store of wealth. So I should really say that silver coins were the primary reference (for most people) and gold was the reference for the wealthy. The very word “dollar” means a silver coin.
SB doesn’t understand that dollar paper notes only might be a certificate for a certain amount of gold, silver or whatever. He thinks that is price fixing…
If every dollar in society has to equal a specific amount of gold that requires a government.
No, it does not.
If Mc Donalds gives out notes saying you get one Big Mac for each of them (in your terminology: one of those MC-notes equals one Big Mac), you don’t need a government for that.
McDonald’s giving out a coupon for a big mac is not money dummy. it isn’t used as a “medium of exchange,” so your point isn’t even valid. And McDonald’s doesn’t exist without the government anyway. I think one big problem you guys have is in thinking private corporations now are somehow anarchistic, which they obviously aren’t.
Who is going to determine what to set the price of gold at ? a company like Mcdonald’s? How does this company come into existence?
I wanted to make the procedure clear how it works. Because it is essentially the same. A private company gives out a note (certificate) that allows people to redeem it in whatever the private company defines. There is no price fixing!
You know that there were already private banks issueing their own notes backed by precious metals, which were used as money? Or do you deny that?
As I already explained to you, the meaning of the word “dollar” is a silver coin. So yes it would require some authority to insist on the equality between a silver coin and a specific amount of gold. This is the bi-metal standard and it never worked, so I think you will have to try hard to find any libertarian willing to support it. The exchange rate between silver and gold should rightly float just like any other exchange rate. Free market don’t you know.
If you are holding a paper note and calling it a “dollar” then very likely you are holding an FRN which is colloquially called a “dollar” but in fact has nothing to do with silver at all.
Err, every pirate from the invention of the sailing ship onwards?
What did they wear in their ears, on their hands? What did they bury in chests, or hoard in their boats? Oh yeah, gold I guess. Were they fussy about exactly which stamp was on the gold? Hmmm, not really.
Also, the Norse raiders and the danegeld paid to them (often in fact the geld was silver) which was then chopped and redistributed as fragments for trade purposes (typically without any sovereign coinage, and in many cases simply random pieces of jewellery and religious icons were taken).
So pirates going around the world and stealing from people is your example of the “ideal” system. I imagine pirates took other jewels and so on as well, as well as other resources, like food.
How in the world does that prove anything?
What a gold standard is is when a dollar is immediately transferable to a specific weight of gold, and this must be applied over a large. None of the pirates had anything like that.
Sorry, do you have something better to do than put words in my mouth?
I very clearly quoted the statement that I was responding to. I have provided two examples of gold being used as currency without state fiat. Both of these examples are historically well documented, and both prove you wrong.
The fact that pirates took other values beyond gold does not in any way weaken the example… the value of gold and other things was determined by supply and demand as one might expect.
“Does anyone else see the problem with those last two sentences?”
LOL! Amazing the author did not.
Hey Bob, have you thought it out yet whether a prolonged barter exchange is the same as an immediate barter exchange?
My name isn’t Bob, but IMO it is. Credit is barter if it is an exchange without already-present money.
Somewhere in some not too distant past comments, Graeber appeared and was claiming victory because his informal ancient credit society was the antithesis of Austrian formalized exchange of equivalent values by stiff old guys wearing suits with vests. That’s what always attracted me to Austrian theory: Knowing that all exchanges are stiff, formal and an exchange of precise equivalents. Graeber’s xamples of informal credit arrangements (I’ll pay you Tuesday for a hamburger today) totally refute Austrian stiff formalism of precise equivalents.
Here’s Graeber’s rebuttal to Bob Murphy from a year ago. Note it’s written in Graeber’s own words:
“All evidence that exists points to money emerging as a series of fixed equivalents between silver – the stuff used to measure fixed equivalents in long distance trade, and conveniently stockpiled in the temples themselves where it was used to make images of gods, etc – and grain, the stuff used to pay the most important rations from temple stockpiles to its workers. Hence a silver shekel was fixed as the amount of silver equivalent to the numbers of bushels of barley that could provide 2 meals a day for a temple worker over the course of a month. It was the Temples that actually had a need to extend a silver system from a unit used to compare the value of a limited number of rare items traded long distance” (emphasis added).
Now one can certainly see where Ambrose Evans-Pritchard gets the rhetorical style of the “two sentances” – directly from Graeber himself.
You know, it’s sometimes said that the Austrian School is “pre-scientific,” it is not empirical, it doesn’t let evidence inform it. Unlike the mainstream. I have to lul every time I hear that.
Because here Graeber is imposing his own theory upon the evidence; the evidence actually supports the Mengerian account, but Graeber (and those adopting his position) sweep that part of the story under the rug. Graeber went on and on in that rebuttal to Murphy about how traders wouldn’t use money (per se), then slips in this “silver system” being adopted by the Temples – that is, it pre-existed the Temple System.
Graeber then goes on in that rebuttal to discuss legal codes using monetary equivalencies:
““the law says 27 heifers of the finest quality and if they’re not of the finest quality, this means war!” It’s also the situation where there is most likely to be a need to establish proportional values: if the culprit does not have heifers, but wishes to substitute silver plates, the victim is very likely to insist that the equivalent be exact.”
But Graeber – and similarly ideologically-driven Anthropologists – never seem to ask the question “when writing the code, how did they get the idea that 27 heifers was equivalent to x silver plates?” – was it completely arbitrary? Did they pull the numbers entirely out of a hat? Doubtful. it had to be an attempt to capture known (and thus commonly-accepted) equivalents in regular exchange (even if he says there is “no evidence’ for such exchanges). Likewise with the ‘conversion rate’ between the silver Shekel and grain (grain is long – long – known to have been a commonly exchanged commodity. Small aside: it is no accident that wheat is *still* on the back of the dime).
Now, of course, these legal-imposed “exact” equivalencies can only aproximate the reality of subjective exchange, but they had to be “set” close enough that people would be willing to agree that “yes, this is fair” in most cases. That could not have come from arbitrary fiat; it would have been informed by experience of actual exchanges. Only Graeber, his fans, and “All Anthropologists” (I love this “all”) sweep it under the rug for ideological purposes (not at all uncommon in the social-sciences – something I have long empirical experience with, well-predating my attraction to Austrian theory). But they can’t keep the evidence to the contrary from peeking through their narrative – and that evidence supports the Mengerian account.
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“Because here Graeber is imposing his own theory upon the evidence; the evidence actually supports the Mengerian account, but Graeber (and those adopting his position) sweep that part of the story under the rug.
No, he’s not:
Hudson, M. 2004. “The Development of Money-of-Account in Sumer’s Temples,” in M. Hudson and C. Wunsch (eds.), Creating Economic Order: Record-Keeping, Standardization, and the Development of Accounting in the Ancient Near East, CDL Press, Bethesda, MD. 303–329.
Much the same theory holds good for Egypt too:
Henry, J. F. 2004. “The Social Origins of Money: The Case of Egypt,” in L. R. Wray (ed.), Credit and State Theories of Money: The Contributions of A. Mitchell Innes, Edward Elgar, Cheltenham, UK. 79–98.
And as for the notion of how wergeld-like social customs contribute to the origin of money:
Grierson, P. 1977. The Origins of Money, Athlone Press and University of London, London.
Faulty analysis from others does not mean that these groups of individuals are not imposing their theory upon the evidence.
The use of money as a unit of account depends on a pre-existing market link. The value of silver is set by the market, and then individuals qua individuals recognize it as a salable good that can be used for indirect exchange. The notion that these are “authorities” neglects the distinction between imposition by fiat and the mere fact that they are – in accordance with the Austrian account – individuals choosing to engage in indirect exchange.
My guess is because the Kings of the Temples did not officially declare via writing that “there is hereby a market in this domain”, that they believe markets cannot exist.
It’s really funny. It’s like they’re asking to cross the street before they do.
Silver was only imported into Sumer: it was a rare commodity mainly held by kings and the temples. Even when it became a unit of account, it was not being employed widely as an actual medium of exchange.
The notion that it emerged as money as the most salable commodity in trades is highly unlikely.
instead, its significance lies in its use as a weight unit: it was here that the silver unit of account system arose in temples, which were large planning institutions.
Even if we suppose the private sector invented the unit of account function via its weight function, even that would violate the Mengerian account, which postulates a quite different process and is focussed on money’s emergence as a medium of exchange.
“Silver was only imported into Sumer”
And?
“Even when it became a unit of account, it was not being employed widely as an actual medium of exchange.”
There can literally be no evidence if it was, especially if it was as rare (and thus valuable) as you say. I doubt it was that rare if it only accounted for 2 meals a day in barley. (Hell, why didn’t the Temple authorities just use barley as the unit of account – or ledger marks that represented it?)
“Even if we suppose the private sector invented the unit of account function via its weight function, even that would violate the Mengerian account, which postulates a quite different process and is focussed on money’s emergence as a medium of exchange.”
The use of money as a unit of account depends on its function as a medium of exchange. (This point – that the functions of money are derived from its use in exchange – is one you really have trouble grasping for some reason.) No one would look at the historical equivalent of a spreadsheet and declare that they need some physical objects to cart around instead of just adding and subtracting numbers.
“You know, it’s sometimes said that the Austrian School is “pre-scientific,” it is not empirical, it doesn’t let evidence inform ….”
It is. Ludwig Mises defined economics as being axiomatic which means you don’t need any of the “five senses” to be able to do economics, only your reasoning skills. This is an anti-scientific method.
Hayek’s philosophy is pretty much as mystic as the Great Chain of Being and other nonsense; you guys are mystics, cranks really.
“Anthropologists – never seem to ask the question “when writing the code, how did they get the idea that 27 heifers was equivalent to x silver plates?” – was it completely arbitrary?”
What actually happened was that the trades that did go down, which were not barter, but instead things like, “I’ll do you a favor in the future,” couldn’t be measured, so the government started minting gold coins (and other commodities were used) to be able to measure and tax them and implement penalties.
If you read old feudalist codes, laws, and so on, they are exactly as Graeber describes them. Certain crimes carry with them a monetary fine. They chose not based on “commodity money” but what they guess people would be willing to pay and the resources people had; they were not based off commodity money.
So money was essentially created for the purposes of taxation and to implement a social order of punishment for crimes. It was not based off the barter system.
Menger was just wrong, it’s that simple. He was as wrong as Robert Murphy with his conspiracy theories and creationism, he was as wrong as Thomas Woods with his scepticism of science, as wrong as Ron Paul’s claims about the New World Order. What he said was that a commodity used as money, such as shells or what have you, were used to facilitate trade, which is simply not what happened.
You guys are basically the highest level of cranks.
” Ludwig Mises defined economics as being axiomatic which means you don’t need any of the “five senses” to be able to do economics, only your reasoning skills.”
I only need my reasoning skills to do math too, or to analyze various features of computer programs. Is that unscientific? Why do you hate logic so?
“Certain crimes carry with them a monetary fine.”
Presupposes the circulation of such a good as money, such that everyone actually has it.
“What actually happened was that the trades that did go down, which were not barter, but instead things like, “I’ll do you a favor in the future,” couldn’t be measured, so the government started minting gold coins (and other commodities were used) to be able to measure and tax them”
What determined the value of gold in relation to these favors? Or anything at all, for that matter? (I’ll give you a hint – the only possible solution is a market using it as a general medium of exchange, i.e. money.)
“I only need my reasoning skills to do math too, or to analyze various features of computer programs. Is that unscientific? Why do you hate logic so?”
mathematics is not reducible to logic, so to say you hate “logic” if think mathematics is just about reason is false. In fact, logic is probably a subset of mathematics. There are many mathematicians who believe numbers are real and exist, JSM also believed it. (See mathematical philosophy entries — empiricism.) If numbers exist, we’re studying properties in the real world. Quine and putman made the argument since all the physical world has a relation to math, math exists. These mathematical properties have to confirm to what we witness in the real world as well, and no mathematician can remember everything in his head. proofs are often thousands of pages long. So he uses his experience in the real world as much as his reasoning skills.
But math isn’t reducible to logic, nor is CS. So again you show you prattle on the internet instead of learning what you’re talking about.
“Or anything at all, for that matter? (I’ll give you a hint – the only possible solution is a market using it as a general medium of exchange, i.e. money.)”
Well, they weren’t your type of tyrannical markets. Second, they were based on guess work and the work of many “mediums” of exchange that had nothing to do with barter. So the barter story, and hence the Menger story, is false.
“mathematics is not reducible to logic”
Except for the fact that math is literally just a form of logical analysis. Have you seriously never heard of the logical axioms of arithmetic, or dealt with a mathematical proof?
“There are many mathematicians who believe numbers are real and exist”
Then they are absolutely nuts.
“Quine and putman made the argument since all the physical world has a relation to math, math exists.”
Not as a physical entity. Only as a logical relationship between objects, and mental analysis of quantity.
“no mathematician can remember everything in his head. proofs are often thousands of pages long. So he uses his experience in the real world as much as his reasoning skills.”
This line of reasoning is just nonsense. Not being able to remember everything does not demonstrate that “real world experience” can prove anything without applying reasoning to it, and assuming things to even have experience. I don’t have to remember the proof of Euclidean geometry to apply it in engineering, but that doesn’t mean that it is true because real-world experience.
“math isn’t reducible to logic, nor is CS”
Where did you get your computer science degree? Seeing as you claim to refute practically everything I learned about CS obtaining mine – and misinterpreted my statement in the first place.
I must apologize to LK. Exasperating and frustrating as his false claims are, they aren’t so obviously wrong as yours. Comparing him to you was an insult too far, I think.
P.S. I forgot the link to that Graeber reply. Here it is: http://archive.mises.org/18301/david-graebers-response-to-my-article/
P.P.S. I also loved it that Graeber wanted to instruct Robert “Bob” Murphy that people had ordinal preference rankings, not cardinal ones that could be exactly calculated mathmatically. Oh, you don’t say, Dave? Tell me more about ordinal vs. cardinal preferences.
I am certain that gold coins were not in use when the Spartans banned them. It was simply magnificent foresight.
I think this thread has shown that not only are Austrians cranks but they’re conspiracy theorists as well. For example, the failure with Zimbabwe was obviously because of World Bank and IMF policy, not because of all fiat currencies are manipulated by bankers or whatever.
Furthermore, the newest crank has come right out and said he thinks that anthropologists who properly document historical systems are “ideologically driven.” This is another conspiracy theory like claiming global warming scientists are all just politically driven. Notice how these charlatans are online all day promoting conspiracy theories.
I think this thread should show the failure of austrian economics and their inability to site historical data and evidence.
“I think this thread has shown *blah blah blah*”
The only thing it has shown is that you are an utter and complete ignoramus.
” For example, the failure with Zimbabwe was obviously because of World Bank and IMF policy”
The World Bank and IMF are fiat money institutions. Besides, they didn’t do anything. The problem was that Zimbabwe thought, per Keynes, the road to prosperity was to print a lot of money and use it for all their needs. Thus, the multi-trillion numbers on their currencies that are equivalent to about a tenth of an ounce of silver in today’s market – and only because of their numismatic value as a testament to the ultimate failure of fiat currency.
Zimbabwe printed 21 trillion to pay off its debts to the IMF and you say “they didn’t do anything”? Of course they did you conspiracy theorist crank. They were essentially printing currencies to pay off their debts. Their failure was more of an example of the failure of IMF policy. And somalia, which has commodity based standards, has fared even worse than Zimbabwe had, so that is a refutation of “commodity” according to your ridiculous logic.
The IMF didn’t create the debts, nor did it demand payment in such fashion. And the demonstration that printing money does not solve debt problems is a problem with fiat currency.
“somalia, which has commodity based standards, has fared even worse than Zimbabwe had”
Somalia does not have commodity money. It has fiat currency. The fact that there are token coins for small amounts means no more there than the fact that there are coins in the US means there is a commodity standard in the US.
What an amusing debate.
I agree that the above has been quite an amusing, interesting, and important debate. I am currently engaged in a similar intellectual conversation/debate with friends who support the ideas of Voluntaryism but hold the monetary worldview of money originating via the State (they have been influenced by the book “The Lost Science of Money” by S. Zarlenga which seems to be in line with Graeber). For anyone that doesn’t have a grasp of what money is and is new to this conversation, I highly recommend Murray N. Rothbard’s “What Has Government Done To Our Money”.
In regards to the above “comment debate”, if I had to reduce the problem down to one issue of the individuals that continue to claim that money originates via State dictat:
A refusal to logically observe and understand cause and effect.