Block & Barnett vs. Murphy & Mises
I don’t like their chances…
Walter recently sent me his 2020 critique in the Review of Economic Perspectives (co-authored with Bill Barnett) of my 2019 QJAE article in which I weighed in on the fractional reserve banking debate.
Episode 181 of the Bob Murphy Show (which hasn’t dropped as of this writing, so that link might be broken depending on when you read this) features Walter and Bill debating/discussing me on the substantive point, namely, can newly discovered gold–even in a free society with no central bank, commodity money, and 100% reserve banking–cause the Austrian boom-bust cycle?
In my 2019 paper, in order to show that Mises himself thought fractional reserve banking per se caused the business cycle, I quoted his view that newly discovered gold could cause it too, if it hit the loan market before the rest of the market had a chance to fully adjust to the new influx of commodity money. My rhetorical point was that, if you understood Mises’ position vis-a-vis gold, then it would obviously follow that FRB per se caused the business cycle, not just “too much” FRB as Selgin & White would have it.
Anyway, Block & Barnett hit back on this point, arguing in their 2020 paper that in a free society, newly discovered gold couldn’t cause a business cycle, even in principle. However, they seem to have misunderstood the layout of my own argument.
It’s not worth spelling out the details, I’m just warning readers that they should not trust Block & Barnett (2020)’s summary of what “Murphy argues in his 2019 paper.” They at times put words in my mouth that I do not in fact endorse.
To succinctly demonstrate that they are confused about what my actual argument is, I’ll offer just one example. In their conclusion, B&B write the following, and note that the initial quotation (which I put in italics to clarify) is from my own paper (i.e. they are quoting me in the beginning of the block quote below). Note that the “[of FRFBs]” is added by Block & Barnett, NOT by me. This is part of the confusion–Block and Barnett are wrong to add “[of FRFBs]” there; that’s not the camp to which I was referring.
“The claim [of FRFBs] — from Mises and Hayek through Rothbard up to writers such as Salerno in the present day — has always been that credit expansion sets in motion an unsustainable boom.” That is, according to those thinkers and Murphy, commodity credit in the form of new commodity money, both in principle and under typical conditions, has the same distortionary effects as new circulating credit; to wit: such additions to the stock of commodity money and credit cause business cycles, and thus such additions constitute market failure.
So let me now explain why the above block quotation from Block & Barnett is confused, and shows that they got mixed up with what I was doing in my paper.
First and most obvious, FRFB stands for Fractional Reserve Free Bankers. It is guys like Selgin and White. My paper was written against them. So to reiterate, when B&B inserted “[of FRFBs]” into that words quoted from me, they mixed up me with the target of my attack.
Second and less obvious, but still important: The claim I made in that quote is something Block & Barnett agree with too! To wit, credit expansion sets in motion an unsustainable boom. (Credit expansion is the issuance of new fiduciary media, in Mises’ terminology.) So Walter Block and Bill Barnett can be added to the list of thinkers, along with Murphy, Mises, Hayek, and Salerno, who would agree with that claim.
And yet, B&B quoted that and held it up as the thing they were knocking down in their 2020 paper.
“… namely, can newly discovered gold–even in a free society with no central bank, commodity money, and 100% reserve banking–cause the Austrian boom-bust cycle?”
Thank you for bringing this up. I couldn’t fit this extremely important issue into other posts out of fear of the banhammer! Heh.
Ok, so I think this particular issue is basically the only “weak” spot in my anti-crypto-currency views, and it had to be addressed at some point.
The reason this is a problem area is because if I’m going to criticize fiat money (and, by extension, crypto currencies) on the basis that their lack of a link to use-value is what causes businesses to produce things out of sync with consumer preferences (what I consider the fundamental source of the boom-bust cycle), then I have to have an explanation for why an increase in the supply of gold can cause crashes (which I have admitted before on this blog).
If both fiat/cryptos and commodity money are capable of causing crashes, then that suggests that gold is no better off at preventing the boom-bust cycle *at least as far as its quality of being a commodity goes*. And that would remove any use-value based objection to the use of fiat/cryptos.
But I believe I’ve solved this issue for the anti-fiat/crypto position.
The reason an increase in the supply of a commodity into the banking system can cause systemic crashes is not because it first created an unsustainable boom (which fiat does, and I hold that, by extension, cryptos do, too), but because there is a supply-and-deand reduction in the valuation of a commodity for which consumers don’t need so much of, now.
A commodity money can cause crashes in an existing banking system that uses that commodity as money and for loans, but – and this is a thought experiment, here – only the introduction of fiat money in the absense of a banking system can cause the boom/bust cycle, whereas if you started a banking system entirely with a deposit of gold equal to the existing circulating gold (so that the suply of gold doubles, but does not increase thereafter), that could not cause a systemic crash or the boom/bust cycle.
The reason gold can cause crashes in the banking system is only because of a legitimate change in consuer preferences for gold as a commodity, the same reason an increase in the supply of any good would reduce its value on the market. An increase in the supply of gold in the banking system isn’t sending false price signals, but merely satisfying a demand for gold sooner than certain speculators had anticipated.
Whereas the introduction of token money (such as fiat and cryptoes) necessarily sends false price signals because there is no link to use-value.
Fiat / cryptos = boom/bust; Gold = possible systemic crash but without the prior boom, resulting in a cheaper commodity, which is good for production. People would do fine in a banking system comprised entirely of gold that had occasional enormous increases in the supply of gold (eventually, people would naturally switch to something else as money, if the market and prices were left completely free of central planning interventions).
Gold can certainly cause false price signals if it’s produced by forced labor, which has happened too many times throughout history.
It can also cause false price signals if the producers pollute land and water without proper agreement with and compensation to the locals, which also tends to happen a lot. Or if the producers force agriculturalists or other inhabitants off the land to make way for their gold production.
Roman history records damnatio ad metallum, condemnation to the mines, as a punishment for things the Romans in power considered crimes (which might not be the same as what you or I would consider crimes). Some of the mines people were sentenced to work in would have been gold mines. Roman history records that those sentenced to work in the mines were sometimes mutilated.
The Brazillian gold rush that started in the 1690s used a great deal of forced labor.
There was some amount of forced labor involved with the California gold rush, though I’m unsure how much. One perpetrator recorded by history is Charles Perkins.
I remember there’s a whole book, by Jules Marchal, about forced labor in the gold and copper mines of the Belgian Congo.
In present day times, some of the gold produced in Ghana is tainted by forced labor.
“Gold can certainly cause false price signals if it’s produced by forced labor, which has happened too many times throughout history.”
Remember, the price we’re concerned about is goods in terms of gold. So, forced gold mining labor would have nothing to do with the price signals of gold because it’s not a particular amount or change in the amount of gold that sets its value.
Whether slaves mined all the gold or a bunch of gold meteorites landed on the earth, the supply is what it is, and there’s a certain demand for gold as a commodity.
The demand for gold relative to its supply is what sets price on the market. How the supply increases or decreases is irrelevant.
So, consumers set the value of all goods. If you’re a producer that sets a value on their merchandise out of sync with consumer preferences, then congratulations, you’ve become a partial consumer of your own goods in that you are producing goods which are not entirely intended to be sold (because otherwise, the producer would price them to sell).
What causes the boom-bust cycle is being tricked into believing you’re richer than you are so that you make investments that consumer demand hasn’t justified.
(It does also require that many businesses make such mistakes at one time, but I think that consistency in Methodological Individualism demands an explanation of what’s going on in a boom-bust cycle at the level of the individual business.)
But the supply of gold available on the market isn’t a given. And how the supply increases or decreases isn’t irrelevant. It’s dependent on labor to bring it to the market. And that labor matters. Now, I suppose if gold meteorites landed on the earth, then the labor might be rather minimal, but there would still be transportation involved to get the gold meteorites to the consumers.
Considering that isn’t the typical scenario, gold production involves a lot of hard, dangerous work (especially if done without fancy machinery, which is how it was done throughout most of history, and how it is still done some of the time to this day). Furthermore, the dangers can afflict not only the miners, but also the other locals.
When forced labor is not involved, people are less likely to do hard, dangerous work without whatever they consider adequate compensation for the danger and difficulty. So, the gold supply would be smaller, since gold mining, particularly artisanal gold mining, is not a particularly desirable profession, and to the extent it would still happen anyway, the gold would probably be sold at higher prices.
However, when people are forced to engage in less desirable professions against their will, the costs can be much cheaper from the gold customer’s perspective. (Admittedly, this could happen whether the force was direct or indirect… i.e. it could be directly forced labor in the sense of sl***ry, or it could be indirectly forced labor in the sense of a bunch of people’s farms got razed and now they aren’t sure what to do other than mine gold.)
But, you know there are other factors at play. A lot of torture and human suffering. And, if people who want to be farmers are forced to mine gold instead, that means a lower food supply. Greater susceptibility to famines. Basically, whatever those people could do with their lives, both for themselves and for others, other than mine gold, they are prevented from doing.
But people who force others to mine gold (or do something else) are NOT just being tricked into making investments that consumer demand hasn’t justified. They are knowingly and deliberately prioritizing the desires of some consumers (e.g. gold buyers) over the desires of certain other consumers (e.g. people who just want to farm and eat and stuff like that) by means of torture.
And these laborers, who are sometimes forced laborers, often die of silicosis. Even if they are freed at some point, or find a better job, they could still be dealing with lasting health problems for the rest of their lives, and health problems also cause both human and economic problems.
And it’s also not just the question of whether or not the workers are there voluntarily. (That is a huge question, just, not the only one.) Gold mining can poison the local area with mercury, as Kevin Bales explains in Blood and Earth. (Note: Mercury is often but not always used in gold mining. It may depend on what tools the miners have available, or perhaps what sort of gold ore they are mining, but it is used some of the time, even if not all of the time, and often enough to be a significant problem in the world.)
That mercury poisoning of the local environment is likely to have serious human and economic consequences. Not only that, the damage caused my mercury poisoning can be multi-generational.
And the environmental pollution doesn’t happen only with the artisanal miners. Newmont, a Colorado-owned (legally owned, not necessarily morally owned) mining giant goes around stealing land from people in Ghana and using sodium cyanide to extract gold from ore. (When land is taken from farmers by force, it’s theft, even if the farmers receive some sort of “compensation” that was unilaterally set by the thieves without genuine negotiation.)
https://www.sierraclub.org/sierra/2018-1-january-february/feature/women-ghana-battle-us-owned-gold-mine-for-land-and-livelihood
Also, governments can inflate paper fiat currency by simply printing more, and debase gold by diluting the gold with less valuable metals. The latter caused runaway inflation during certain time periods of the Roman empire.
Cryptocurrency is valuable because of the math behind it. People want a currency that the government can’t mess with so easily. To open a bank account, or to do anything with your bank account, or get a credit card, or do anything with your credit card, there are a lot of rules you have to follow. Rules that don’t necessarily benefit the alleged owner of the money. I remember the first bank account I ever opened, the bank decided to close my account without refunding my deposit. I lost everything I deposited in that bank. And there was like, nothing I could do about it.
Being on gold and silver doesn’t seem to have stopped the Roman empire from messing with its currency and disrupting the economic lives of its inhabitants, even if the methods were different.
And it’s not just that. The same so-called “security measures” that make it hard to hide money from the IRS (and other tax-collecting organizations) also make it hard to hide money from domestic abusers.
If you look at the Trezor hardware wallet devices (for cryptocurrency), they support the functionality to create plausibly deniable, hidden wallets.
https://wiki.trezor.io/Passphrase
So if someone is beating you up for information about your finances, you can point them to a low balance crypto-wallet to placate them, and keep your main crypto-wallets hidden.
Nothing like that exists in the fiat currency world. And the IRS is unlikely to allow anything like that in the fiat currency world. And your options with gold are pretty limited to. You’d have to find a good hiding place for the gold, and that might be much easier said than done. It’s not like a passphrase you can store safely inside your head.
“Also, governments can inflate paper fiat currency by simply printing more, and debase gold by diluting the gold with less valuable metals. The latter caused runaway inflation during certain time periods of the Roman empire.”
Yes. The printing of fiat money in excess of specie is functionally equivalent to debasing gold and silver with other metals in that both misrepresent the actual supply of the gold and silver.
Cryptos also misrepresent the supply of the goods bought with it because cryptos were deliberately created with zero backing and therefore literally all crypto prices are the wrong price – it survives on speculating on the value another speculator will place on it, and it’s impossible for it to have any grounding in use-value (it has no uses other than speculation).
To be sure, there’s nothing wrong with speculation, as such, but speculation eventually has to be right or wrong so that someone can make a profit or loss that is *not* based on just guessing. And since cryptos can *only* trade based on guesses, the speculation can never end.
Those that accept cryptos for their gods are merely taking losses that they must pass on to someone else in order to benefit from the Ponzi Scheme. Cryptos are like playing Hot Potato.
“People want a currency that the government can’t mess with so easily.”
Ok, but people also want a currency that has value. And I’m not talking about *intrinsic value*, which doesn’t exist, but value that is linked to someone’s subjective ends.
(A sandwich *does*, in fact keep me alive, and so one could reasonably speculate that investing in the production of sandwich ingredients has the grounding of someone actually wanting to eat a sandwich.)
If all we had to do was play pretend in order to have a functioning economy, we can do that with literally anything at any made up price, or even nothing (since we’re just making up values, anyway).
Turns out you can end poverty by getting other people to pretend you have something valuable when you don’t. You can run an entire economy on the fumes of pure speculation – who knew.
How are so many Austrians not able to recognize the Keynesianism / John Law in cryptos?!
(Aside: I, personally, do *not* value having my personal information attached to say, a car or a house, indefinitely, so I don’t think that using the blockchain [different from cryptos, with possible value outside of cryptos] to track the history of ownership is a great idea.)
Cryptocurrency has value to people because math has value to people. Of course, it’s not intrinsic (at least not in the sense of having the same value for everyone) because not all people value math, and those who do value math don’t all value math equally, but in so far as there are people who value certain kinds of math, and cryptocurrencies provides the kinds of math that certain people value, cryptocurrency has value.
There’s no crypto that ever pretended to have backing, nor any intrinsic value other than whatever the heck you want to pay for it. Sure, don’t buy it if you have come to the conclusion that the value is zero … no one forces you to buy it … but what exactly did they “misrepresent” ?
As a disclosure statement: I do not own any cryptos although I probably will tinker around with Monero at some stage, when I have more time … but no I do not recommend that anyone put their life savings into crypto currency … it is highly speculative and risky. The point is that some people sometimes find it interesting for their own reasons, and it’s a new technology that might one day take off.
The first bank I ever opened an account with closed my account without ever returning my deposit, so I honestly can’t recommend anyone put their life savings in a bank account either.
Also, according to US law, since I don’t have a financial adviser license I can’t legally give financial advice to anyone.
Nevertheless, the first bank I ever opened an account with completely robbed me of my entire deposit, so while I can’t give financial advice, I do definitely feel that I can say that I really don’t like banks.
Also of interest, coerced debt and domestic violence go hand-in-hand
https://www.hppr.org/post/coerced-debt-often-follows-domestic-violence-survivors
So in other words, shoddy bank security (so shoddy it should really be called “bank insecurity”) based on personal information that is often known to domestic abusers make it very easy for domestic abusers (usually but not always men) to steal from people (usually but not always women).
A cryptographic private key, on the other hand, can be kept private in a way your government identification information can’t be.
Although Littwin is wrong about this,
Actually, you can find cases of of “coerced debt” going back at least as far as the Roman empire, and probably longer. Of course, the methods were different, but in many cultures throughout history and going up to the present day, it was considered possible to “inherit” a debt that you personally never agreed to. Historically and in present times, this practice has often been used as a justification for forced labor across multiple generations.
Also, going back to the domestic violence situations and coerced debt, a domestic abuser could simply beat or strangle or otherwise torment his victim until she or he “agreed” (under duress) to the debt. Anonymity was never required.
“There’s no crypto that ever pretended to have backing, nor any intrinsic value other than whatever the heck you want to pay for it.”
Ok, but then why won’t anyone accept handuls of dirt in exchange for goods?
You can’t offer the (arbitrarily) limited supply of bitcoins because once you decide you can make up the value of bitcoins (i.e. it has no link to use-value to ground the price in subjective ends), then supply is irrelevant because no one is preventing you from making up a different valuation along with a change in supply.
Supply matters for prices when it’s a supply of something that satisfies subjective ends, not when the value of a supply is made up – because you can make up any value you want for any supply.
So the arbitrarily limited supply of bitcoins is moot.
People have ends they want to meet with actual physical things serving as the means. Those means are scarce. The demand for those means (based on people’s ends) given the supply is what causes prices.
Bitcoins don’t act as the means for any end except speculation about another person’s speculation. It’s a Ponzi Scheme.
Bitcoins aren’t even a money substitute (that is, a promise to redeem bitcoins in a particular good).
(By “bitcoin” I usually mean “small b”, and the technology behind bitcoins I refer to as “blockchain”. They are separate economic concepts since “efficient delivery” of some thing cannot make that thing valuable.
(For example, if Amazon allowed me to, I could use their efficient delivery system to sell you some doggy doo – I’ll even tell you that if you decide to buy it at the price of a pizza, that we can both tell people that it sold for some yesterday-price and that the fact that it has a yesterday-price is why others should value doggy-doo.
(I doubt efficient delivery is what’s going to get people to buy doggy-doo.)
The economics of why delivery can’t impart value is because value is subjective to the ends of an individual, and not intrinsic to the thing that is valued such that the thing, itself, is what sets part of its own value.
So value can only be imputed backward through a structure of production – a diamond mine only has value because people value diamonds; bread machines only have value because people value bread.
So, the thing being delivered must first be valuable in order for efficient delivery of that thing can be valuable.
The blockchain may be valuable for efficient delivery or record keeping [let’s face it, blockchain doesn’t transfer anything, it just record-keeps], but that logically cannot be the thing that gives bitcoins their trade value.
The technology, the math (as @”random person” mentioned), the security of transfers, the non-existent privacy in transactions – none of these can cause bitcoins to have value because delivery is a good [service] of higher-order than the thing being delivered, and value is only imputed backward through the structure of production.
The only subjective end that bitcoins can have is the profit someone can from the Cantillon Effect of passing on their losses to someone else (handing someone nothing for something is not an exchange) who hopes to pass on their bitcoins to yet another speculator. Again, that’s a Ponzi Scheme.
Uhhh… have you ever been to a garden supply store?
Also see:
https://homeguide.com/costs/fill-dirt-sand-topsoil-cost
People will certainly pay money for handfuls of dirt they consider to be of sufficient quality.
Sorry, I am tired, and this is not a full reply to your comment, just one thing I feel like saying before crashing into bed.
Testing.
(Responses aren’t going through.)
Oh, good, I’m not being cancelled.
Ok, let me try this a piece at a time:
“People will certainly pay money for handfuls of dirt they consider to be of sufficient quality.”
The point was that they don’t accept handfuls of dirt as money.
I can’t get the next part to go through.
Basically, I was saying I understand about the being tired.
I responded to the comment about the garden supply store, but I basically was saying the same thing as what I was able to post.
The supply store response was specific to the supply store, whereas the other response was more general. Same thing, though.
I mean, with over 7 billion people in the world, someone, somewhere, has probably tried using dirt as money.
And, the reasons people don’t typically use handfuls of dirt as money isn’t because dirt is without value. If people did decide to use handfuls of dirt as money, it wouldn’t be a pyramid scheme.
I suspect that the following are why handfuls of dirt are not typically used as money:
* High quality dirt is *too* valuable to be used as money. It is absolutely essential for supporting large populations, which we tend to have a lot of around the planet. You want it to be out there helping food to grow, not being carried around from store to store.
* Being kept in people’s wallets without access to the proper hydration, aeration, and sunlight could potentially reduce its value.
* People who are not farmers, or otherwise experts in soil quality, might not be qualified to judge the value of any particular handful of dirt. People prefer a currency that is easier to count the value of.
* It would be kind of heavy and messy to carry around everywhere to use as money. People prefer more lightweight currency that doesn’t leave stains.
Again, if people did use handfuls of dirt as currency, it wouldn’t be a pyramid scheme. Dirt has real value. It could be a bad idea to use it as currency for other reasons, but it wouldn’t be a pyramid scheme.
Guest wrote,
Bitcoin (and other cryptocurrencies) have other uses besides investment. For example:
1. An immigrant working in a wealthier country may wish to send remittances home. (Remittances are like, when they still wish to financially support their family even though they no longer live with their family.) Even if the amount their family ends up receiving when they send money via Bitcoin or another cryptocurrency ends up being less than what they sent, because of transaction fees, price fluctuations, etc, it could still be substantially cheaper to send money home via Bitcoin (or another cryptocurrency) than to use the traditional banking system. This is especially the case of the traditional banking system of their home country is set up to rob the people of remittance money, e.g. like in Lebanon. In Lebanon, the “official” exchange rate between the dollar and Lebanese Lira is different from the black market exchange rate, and you can only withdraw in Lebanese Lira, and there’s a limit to how much you can withdraw per month, so, basically, the banks keep a lot of the US dollars people send their families from abroad and only let the people withdraw a little. With Bitcoin or another cryptocurrency, people can completely bypass the corrupt banks.
https://www.elephantjournal.com/2021/02/the-biggest-bank-scheme-how-they-stole-my-money-estephan-haddad/
www [dot] coindesk [dot] com/lebanese-bitcoiners-show-how-to-talk-about-crypto-at-thanksgiving
www [dot] coindesk [dot] com/crypto-remittances-latin-america-geopolitical-tension
2. Throughout the world, many people lack the government identification required to use banks. I can open an “account” with Bitcoin or another cryptocurrency without an ID, just by getting some software and generating a private key. True, I might not be able to use any of the exchanges that require KYC (Know Your Customer), but there are plenty of decentralized exchanges that require no such thing. (Cryptographic keys can also be stored on a smartphone, on a hardware wallet, or on paper.) Dash (one of the non-bitcoin cryptocurrencies) even has a system for sending and receiving Dash via SMS, for people who have SMS but not internet access.
dashnews [dot] org/cryptobuyer-partners-with-dash-text-for-sms-cryptocurrency-purchases/
decrypt [dpt] co/46019/bitcoin-helping-undocumented-immigrants-send-money
3. With cryptocurrency, it is possible to do microtransactions, globally. For example, it’s possible to pay someone in the Philippines (or anywhere else in the world) 1 satoshi (which is still worth less than 1 US penny) to view an advertisement for like 2 seconds. Another popular minijob people often do in exchange for cryptocurrency is to complete surveys.
4. Bitcoin can theoretically be private, if you’re careful how you handle it. (Avoid buying it with credit card, use Tor or a VPN, avoid exchanges that require KYC, and so on.) However, for optimal privacy, many people prefer to use other cryptocurrencies, such as Monero, Zcash, or Horizen. A popular use for the privacy features that cryptocurrency offers is to pay for VPNs. People with a high need for privacy, e.g. dissidents living in oppressive countries, could even chain VPNs (that is, use multiple VPNs, one after another), and pay using Monero or something.
www [dot] investopedia [dot] com/tech/five-most-private-cryptocurrencies/
5. Certain cryptocurrencies, such as Ethereum, enable “smart contracts” which in turn enable tokens. Tokens can be backed by real world things, such as gold. Tokens can also represent shares of a company and therefore have the potential to replace the traditional stock market.
cryptobriefing [dot] com/top-5-gold-backed-cryptocurrency-tokens/
www [dot] quora [dot] com/Can-tokens-cryptocurrencies-replace-stock-shares-in-a-startup
“An immigrant working in a wealthier country may wish to send remittances home. …”
“… it could still be substantially cheaper to send money home via Bitcoin …”
This was already covered. People accept bitcoins as money only because they speculate that someone else will also speculate that someone else will accept it – it serves no value as a means to satisfy actual subjective ends, and so it has no grouding in the real economy. It’s a game of hot-potato, pure speculation. A Ponzi scheme.
Also, for the pro-bitcoiners that correctly get on Peter Schiff’s case about his belief in “intrinsic value”, when you say that money doesn’t need to have a use-value of its own to have value as a money, what you’re saying is that money *can in fact* have a value of its own – a contradiction of the belief that there is no such thing as intrinsic value.
Since there is no use-value of bitcoins, and since bitcoiners (should) want to avoid claiming that there’s something about bitcoins that are valuable on their own (intrinsic value), that means the only subjective value that bitcoiners have left is pure speculation – a Ponzi scheme.
(I’m not convinced Peter Schiff actually believes in the concept of “intrinsic value”; Rather, he uses those words as a term of convenience to describe something that is actually valued for its use, as opposed to pure speculation. I’ve heard him address this point once before, and he said something to the effect that, whether you call it intrinsic value or something that people value for its uses, my criticism stands. I can’t remember his exact words, but that’s how it came across. So he seemed to be equivocating on those two concepts.)
The rest of your examples are covered for the same reasons.
“… but there are plenty of decentralized exchanges that require no such thing.”
Exchanges imply you’re going to dump your bitcoins for something of value. The only issue for my side here is that I don’t hold fiat currencies to be money, either, and for the same reasons as cryptos.
Cryptos are riding the fiat money Ponzi scheme, and cryptos would die even sooner that fiat if fiat money didn’t exist.
If there was an exchange that accepted bitcoins for gold, then the sellers of gold would be taking losses because bitcoins aren’t money but gold can be, and is at least something with a use-value.
“With cryptocurrency, it is possible to do microtransactions …”
Transactions imply that one is trying to use cryptos as a money, but this was already covered.
“Bitcoin can theoretically be private …”
Already covered: Privacy in a transaction cannot imbue the things that are traded with value.
“Certain cryptocurrencies, such as Ethereum, enable “smart contracts” which in turn enable tokens. Tokens can be backed by real world things, such as gold.”
If the thing that enables “smart contracts” is the record-keeping function of the blockchain, then the blockchain’s usefulness is as a record-keeper, not a currency. I’ve already acknowledged this as a possible value for the blockchain.
If the token is just proof that you’re a party to a contract, then the token is not being used as money.
If the “smart contracts” are really just negotiable IOUs, then that’s no different from what banks originally did with negotiable paper claims to silver – they were never money, and they were only as good in trade as the bank’s promise to deliver on what the paper said was owed.
When people made runs on banks, they didn’t say, “that’s OK, all we need is these IOUs; we’ll just use those as money”. But the logic of pro-bitcoiners is that they very well could have, and the economy would have hummed along just fine.
I mean, by your expanded definition, I think you could say that fiat currency is a big Ponzi scheme, since many people only accept fiat currency in the hopes that someone else will accept it in exchange for whatever it is they really want. (True, some people might value Fiat currency just for the pictures and the text saying “in God we trust”, but these people are probably a minority.)
And, come to think of it, a lot of people who accepted gold or silver currency were probably less interested in the gold or silver itself than in whatever they could buy with it. I mean, really, if you consider all that forced labor and toxic pollution with mercury and cyanide that I mentioned above, we would probably be better off with a lot less gold mining on our planet.
So, maybe the record-keeping is the value in and of itself? Maybe people want to know, that, according to the Lords of the Money, the person they are handing over their tamales (or whatever) to “deserve” those tamales. And then, when they have the money, then according to the Lords of Money, they “deserve” to get something they want, like a pair of shoes.
Which is all well and good, until someone evil finds an evil way to get the money (e.g. selling bombs to murderers), and then even though they did something evil (sold bombs to murderers) for the money, now the Lords of Money are claiming they “deserve” lots of Starbucks cappuccinos (or whatever) in exchange for their work in selling bombs to murderers.
Bitcoin (and other cryptocurrencies) doesn’t really solve that problem. But money has been useful primarily for it’s record keeping capability more than for anything “intrinsic” for a long time. And, if nothing else, bitcoin does give us a better chance of solving that problem than if we just let the governments continue controlling the money.
“I mean, by your expanded definition, I think you could say that fiat currency is a big Ponzi scheme, since many people only accept fiat currency in the hopes that someone else will accept it in exchange for whatever it is they really want.”
Yes, fiat money is a Ponzi scheme, but the words you’re using do not represent my positio.
The fact that everyone who invests in a Ponzi scheme is doing so to get whatever it is they want does not legitimize the transactions.
They are wrong about their investments, even when some of them are able to make profits off of other people’s losses.
What I’m saying is that, just like in a Ponzi scheme, those who participate in the trading of bitcoins cannot all – even in theory – end up with a net gain.
Yes, Ponzi schemes bear on the real economy in that real resources are changing hands – but it’s the exchange of speculation only.
If you really wanted to, you, could do rain dances, and your decision would bear on the supply and prices of rain-weather clothing and supplies – but all your purchases does not imbue rain dancing with value.
“… a lot of people who accepted gold or silver currency were probably less interested in the gold or silver itself than in whatever they could buy with it.”
True. But the trade value of gold as money is grounded in the fact that some people in the economy value it for its non-monetary uses.
If I find out my neighbor makes things out of gold and would prefer a supplier to mining the gold himself, the fact that I buy gold to give to him in exchange for something does not prove that gold functions as money without a use value.
My holding of gold is grouded in my neighbor’s desire to make something out of it.
And someone else, who knows nothing about my neighbor, who sees that I pay for gold, and then chooses to buy gold to sell to *me*, also does not abandon the link to use-value, since his purchase is indirectly grounded on my neighbor’s desire for gold’s use-value.
Extend this chain of gold-money trades as much as you want amont those who don’t value the gold for it’s use-value – they are all still grounded in *someone’s* desire for gold’s use-value.
So, the fact that most people don’t value gold other than as money does not require an abandoning of a link to use-value, and it doesn’t prove that the function of money can be performed with something that has no use-value.
“So, maybe the record-keeping is the value in and of itself?”
Well, something else that has value would need to be present for record-keeping, itself to have value. What good is a record-keeper without the need to keep a record of something.
We could imagine a future need for record-keeping, but only when it is needed does it have value.
“And then, when they have the money, then according to the Lords of Money, they “deserve” to get something they want …”
Contracts are not money. Tokens can be used as money substitutes if they are redeemable in a specific good.
But I would say that tokens that are negotiable (that is, they can be redeemed by any holder, even other than he to whom the bank made the obligation, are fraudulent.
I believe negotiable tokens / IOUs are fraudulent because debts cannot logically be owed to someone other than debtor.
I don’t owe anybody anything unless I made a contract with that person, specifically.
“But money has been useful primarily for it’s record keeping capability more than for anything “intrinsic” for a long time.”
To think of money as having a record-keeping capability is to think of them as tokens with identical values to the things being traded.
This is impossible because trades cannot logically have the same value as the thing accepted – because if they did, there would be no need to make the trade (because you already have something of supposedly identical value).
So, trades are always an attempt to satisfy double-coincidences of wants, even when using real (commodity) money.
So the record-keeping capability of the blockchain cannot imbue bitcoins with money-ness.
Reputation has value.
One time, I bought an ice cooler from REI, and carried it out of the city and up a desert mountain on foot. The next day, someone bought me dinner, just because I walked past him while I was doing this, and he said I inspired him. So I guess being inspirational has value to some people.
This was actually not that long ago. The lockdowns were extremely devastating to me on a personal, so I was living in some anarchist camp on a desert mountain for awhile, and the purpose of the ice cooler was to protect our food from the mice.
One time I helped a guy whose wife had cancer with some fundraising efforts, and a third person, who saw me do this, gave me a gold bracelet out of the blue (for me, not for the fundraising) just because he thought I would nice. So having a reputation for being nice apparently has value.
Sometimes, on years when I was doing well enough that I could afford to buy little Christmas presents for many people, I did that. And I actually ended up getting back in presents more than I received. Most people gave nothing back. But a few who did give back, would give back way more than I gave them. Some even gave money, like they hadn’t spent time Christmas shopping, but they were just like, here, you are nice, have some money for Christmas.
Again, being perceived as nice apparently has value.
I’ve also been bought food on a number of occasions after I listened to someone tell me about whatever traumatic stories in their lives were bothering them. And they thought I was nice, so sometime afterwards they bought food for me. Like, this doesn’t happen all the time, it’s not like I was charging people to listen to them talk about these terrible things that happened to their lives, but I guess it had value for some of them, so they bought me food. Nice food, sometimes.
You see, reputation has value. So, looking back to pre-lockdown times, when people were arguing more about the merits or lack thereof of capitalism (rather than arguing about the merits or lack thereof of lockdowns), you would see pro-capitalism people arguing things like, “The rich get rich by making the whole world richer”, and anti-capitalism people arguing things like, these banks and big international companies got rich off of selling nuclear weapons to evil governments and torturing labor out of Africans and poisoning people’s water. Because, a big part of the debate over capitalism is if the rich people (or specific rich people, since making generalizations could be dangerous) deserve their wealth.
Which indicates to me that money is primarily intended as a reputation management system. If someone offers me $100 for a tent or something, I am supposed to believe that they’ve done at least a $100 worth of good in the world, and that they wish to reap the rewards of that goodness by getting the tent, and that if I give them the tent, I will be doing $100 worth of goodness and will be able to reap the rewards at some point. Maybe I don’t believe that. Maybe I suspect that they got the $100 by investing in some company that tortures labor out of Africans. Maybe I have no idea if they got the $100 doing good or evil. But maybe even if I have no idea, I know that the world seems to believe that $100 seems to count for something, and that I can use it to get what I want whether it’s fair and just or not, so I play along even if I don’t believe.
I think that’s a big part of where pro-capitalism and anti-capitalism people disagree. About whether money is a good reputation management system, or it is a terrible reputation management system that we’re just playing along with to get what we want because everyone else is.
“The lockdowns were extremely devastating to me on a personal, so I was living in some anarchist camp on a desert mountain for awhile …”
I’m glad you were able to resist the lockdowns to some extent.
“Reputation has value. …”
“… Which indicates to me that money is primarily intended as a reputation management system. …”
“… I am supposed to believe that they’ve done at least a $100 worth of good in the world …”
Your reputation (which consists of *other* people’s perceptions, and is something that cannot be owned) is based on the profit motive, just like every single other deliberate action people take.
Other people perceive a benefit in encouraging acts of kindness, and that’s why they gave you stuff – so that you’ll keep doing those things.
The acts they perceive as beneficial are not necessary (at least with regard to them being thoughtful acts), to be sure, but at any rate they are services – entirely subsumed by the profit motive (so long as they’re voluntary).
“… these banks and big international companies got rich off of selling nuclear weapons to evil governments and torturing labor out of Africans and poisoning people’s water.”
First, selling to “a government” is an attempt to have multiple people be the owners of something, which makes no sense because ownership means the exclusive right to use something.
Get rid of the government, and you won’t have this problem.
Torturing labor out of Africans:
Are Diamonds Really Forever?
[www]https://mises.org/library/are-diamonds-really-forever
“In particular, in South Africa, the major center of world diamond production, there has been no free enterprise in diamond mining.
“The government long ago nationalized all diamond mines, and anyone who finds a diamond mine on his property discovers that the mine immediately becomes government property. …”
“… In short: the international diamond cartel was only maintained and has only prospered because it was enforced by the South African government.
“And enforced to the hilt: for there were severe sanctions against any independent miners and merchants who tried to produce “illegal” diamonds, even though they were mined on what used to be private property. The South African government has invested considerable resources in vessels that constantly patrol the coast, firing on and apprehending the supposedly pernicious diamond “smugglers.”
Poisoning people’s water.
I haven’t looked much into this one, though I’m aware that it has to do with Exxon dumping their waste in rivers in other countries.
But consider the fact that you have a bunch of people who want water really bad – and yet there are no greedy, racist capitalists there who are greedy enough to attempt to make a profit supplying water to them.
It’s obviously not the profit motive that’s preventing these people from getting water.
Also, in a free market, no one prevents another company from coming in and employing Africans to produce or deliver water.
So, you have a high demand but without a desire to supply that demand.
I would look somewhere other than Exxon for the lack of drinkable water.
Guest wrote,
Yes, thank heavens for desert mountains. And sleeping bags. And tents.
(Also, my previous post had I typo, I meant to write, “The lockdowns were extremely devastating to me on a personal *level*, so I was living in some anarchist camp on a desert mountain for awhile.”)
Guest wrote,
Yes, exactly.
Ownership is a rather specific concept, and one might not be selling ownership. One might be selling stewardship, or possession, or control, or even something more abstract. (If someone pays me to tell them a story, I’m selling something, but what exactly?)
The point is that certain companies manufacture or are in some way involved with the manufacture (e.g. by means of investment) of nuclear weapons, which are then transferred into the control of evil governments in exchange for money. (And yes, “government” is an abstract concept, but it’s quicker to type out “government” than “a bunch of military people who probably take orders from political leaders”. Not that that’s all “government” can refer to, but that is basically what it refers to in this context.)
Guest wrote,
Do you have an actual plan for getting rid of the governments of the world, ideally a plan that doesn’t involve killing or torturing people nor result in even worse governments rising up in their place?
Bitcoin and other cryptocurrencies alone won’t get rid of the governments. But they should at least weaken their control over the reputation management system known as money.
I remember, you quoted that article to me before. And I replied here.
https://consultingbyrpm.com/blog/2020/10/bms-ep-152-the-coming-darkness-and-renaissance.html#comment-1996502
I do acknowledge that the South African government has caused plenty of harm in that area. They just aren’t the only ones who have caused harm in that area.
However, when I spoke of “torturing labor out of Africans”, I was thinking of examples of forced labor in Africa of which I have more knowledge. For example, King Leopold’s brutal forced labor regime over the Congo, for the sake of extracting ivory and rubber. (For more details, see “King Leopold’s Ghost” by Adam Hochschild.) In Post-Leopold Congo, under Belgian rule, massive forced labor programs for extracting things like gold, copper, ivory, palm fruit, and uranium. (For more details, see books by Jules Marchal. Except Jules Marchal doesn’t mention the uranium, I found that in a book by Tom Zoellner.) In more recent Congolese history, militias extracting a variety of minerals at gunpoint, and those minerals somehow finding their way into cell phones and other electronics for Western customers. (For more details, see “Blood and Earth” by Kevin Bales.)
Or in the Ivory Coast, when a lot of cocoa was harvested by means of forced labor relatively recently, and Nestle and some other companies went to court rather than pay reparations to a few of the victims who actually managed to (eventually) make their way to US court.
Various forms of water pollution have happened in many countries, including the United States.
The documentaries “Split Estate”, “Gasland”, and “Gasland 2” discuss the poisoning of water in the United States by oil/gas drilling companies. People frequently get sick before they even find out the water’s been poisoned. Some of them actually do end up getting water delivered — at very expensive prices. Some people have their water poisoned so bad, their tap water becomes flammable.
Actually, there are greedy, racist capitalists who do just that. In Mauritania. Unfortunately, they often employ forced labor. I read about this in “Disposable People” by Kevin Bales.
I remember in one video or documentary I was watching (which I can try to find for you), it mentioned that in Nigeria, companies like Shell were burning off gas into the atmosphere, rather than ship it out of the country to sell elsewhere or sell it to the local Nigerians because a) they didn’t have the infrastructure to move it out of the country and b) the local Nigerians were too poor to be able to buy the gas at a price that would be profitable for the companies. So instead, companies like Shell would drill for the oil (which is easier to ship out of the country), and burn off the gas. And the oil and the gas naturally come together, apparently. This gas flaring caused massive air and water pollution, leading to a number of ShellGuilty protests.
Or to take another example, say someone wants to start an e-commerce store. Regardless of where the person who will be starting the store will be located, the most desirable place to sell is in the United States, because the United States has a lot of people with a lot of wealth between them. Selling to places like Canada (or at least southern Canada), Europe, and Australia can also be acceptably profitable, but for someone just starting out in e-commerce, the United States is the most desirable market. Why? Because Americans are rich. So, just yesterday, I was watching a Youtube video from a guy in Indonesia, who sold over Facebook Marketplace to United States customers.
When you have really high demand without a desire to supply that demand, it’s usually because the people with the demand are too poor to make it profitable to actually serve their needs.
Alright, so I completely understand why a guy in Indonesia would want to sell to US customers. That makes total sense. It’s sad, but it’s not his fault that that’s how the incentives are set up, and he’s probably no worse than numerous other people running e-commerce stores with the same business model.
But why are the incentives in our global economy so screwed up, that a company like Shell can make more money by poisoning Africans, than by serving them?
Or what about King Leopold? Why did he get so rich even though his brutal forced labor regime killed approximately half the population of the Congo?
Why doesn’t the system instead reward people like Kevin Bales who are trying to solve these sorts of problems?
There are many possible answers to this. I guess the short answer is, “Life is unfair.” But it’s more than just unfair… there is much evil in the world.
But anyway, money is clearly a broken reputation management system if evil governments and banks/companies that sell nuclear weapons and King Leopold II and Nestle and Shell can get so much of it in spite of all the evil they do.
On the topic of water pollution in the United States, here is the documentary “Gasland”.
https://watchdocumentaries.com/gasland/
Concerning King Leopold’s brutal forced labor regime in the Congo, see this documentary, “White King, Red Rubber, Black Death”.
https://topdocumentaryfilms.com/congo-white-king-red-rubber-black-death/
Video of someone in Indonesia who sells to US customers over Facebook marketplace.
https://www.youtube.com/watch?v=slIs1YFM9vM
Here’s a documentary about gas flaring in Nigeria. https://topdocumentaryfilms.com/poison-fire/
Responses to some of these, below, for ease of reading.
Is Mises’ hypothetical gold rush caused cycle taking place in a free society, or does he actually not specify but you assume he means it would in one?
The Selgin & White argument is that a free banking system increases of decreases the quantity of money substitutes only in response to, and are this constrained by, the demand to hold money substitutes. Do you also think that if gold production rose in response to increased demand for gold, that it would cause a business cycle?
Doesn’t the fact that the guy who found the new gold coins lends them out at below market rates (and thereby lowering them) imply that his time preference is lower than the time preference of the society at large. And him becomimg wealthy lowers the time preference of the whole economy? So why is it a problem if interest rates fall?
Mon. 21/02/22 17:45 EST
Question for Bob Murphy:
What (who, when) is the origin of the idea that the economy cannot grow unless the supply of gold/money also grows?
Also, has this (fallacious) idea been given a name?
I think that Block & Barnett are confusing two different issues in the concept of money:
[1] The invention of money as a tool that makes transaction easier, and the broadly accepted means to solve the “coincidence of wants” problem.
[2] The total quantity of money in the system.
Once the general problem has been solved … shunting more money into the system as a whole does not solve it proportionally better. Let’s use Warren Mosler’s analogy of football scores … the concept in principle of having a score to show who is winning makes the game more exciting, but if you change the rules making every 1 point in the old system 100 point in the new system it won’t make the game 100 times more exciting.
Response to @”random person”:
Excerpt of Blood Diamonds: Corruption and Torture in Angola
[www]https://www.sampsoniaway.org/blog/2015/06/15/excerpt-of-blood-diamonds-corruption-and-torture-in-angola/
““I, personally, together with Marco’s mother and a lot of people from Luremo, where many of the mothers have lost children, went to the police. They told us to take it up with the FAA. …”
“… On April 3, 2010, the newspaper Semanário Angolense printed the contents of Linda Moisés da Rosa’s testimony, while the FAA continued to ignore the case. The same happened when, on June 19, 2010, The Wall Street Journal published a long report entitled “In Angola the Blood Diamond resurfaces,” which referred to the 45 miners buried alive by the FAA. The army did not even reply to requests for comments on the matter.”
It looks like the FAA was doing government work, here.
(English) Blood Diamonds: Angolan Generals Defeated in Court Case in Portugal
[www]https://www.makaangola.org/tag/teleservice-en/
“… is a chilling account of systematic human rights abuses by soldiers of the Angolan Armed Forces and guards of Teleservice, the largest private security company in the country. The generals are shareholders of both the diamond mining company Sociedade Mineira do Cuango, and its security contractor Teleservice.”
So, the generals, who have an interest in protecting the DeBeers cartel, are investing in a security company that is supposedly undermining that cartel? Teleservice is the largest private security company, but it’s allowed to offer private protection services to private miners?
Looks like Rothbard was right all along.
“Some people have their water poisoned so bad, their tap water becomes flammable.”
[Timestamped]
Myths About Fracking
[www]https://www.youtube.com/watch?v=d_U6a8AvyPg#t=2m33s
The relevant part about flammable water runs for one minute.
Also this:
State Department Promoting “Gasland”, Other Enviro Films To Foreign Audiences
[www]https://redstate.com/absentee/2012/02/17/state-department-promoting-gasland-other-enviro-films-to-foreign-audiences-n42279
“That scene, that most pivotal scene, is not what it appears to be. As our own Steve Maley has pointed out, both the Colorado Oil & Gas Conservation Commission and the Pennsylvania Department of Environmental Protection, among others, have debunked Fox’s claim: …”
“… and b) the local Nigerians were too poor to be able to buy the gas at a price that would be profitable for the companies. So instead, companies like Shell would drill for the oil (which is easier to ship out of the country), and burn off the gas. And the oil and the gas naturally come together, apparently.”
Wait. So, the gas is a byproduct of extracting what they are, in fact, capable of making a profit off of – the oil – and they would rather make zero off of it rather than getting *something* from even poor Nigerians – like maybe their labor (because saying Nigerians are “too poor” to afford the gas implies that they actually want the gas).
I don’t think you understand the profit motive. Also, the infrastructure thing has to be about regulations – again, if you have the demand and no one is “greedy” enough to supply that demand, that’s not a market failure, that’s a central planning failure.
I’ll have to get to the others some other time.
Uhhh… to be clear hear, are you talking about “protection” in the sense of a hero-like figure (or group of figures) “helping the helpless” (or whatever) in exchange for money (or some barter good or whatever), or “protection” in the Mafia sense of “pay us money or else we’ll torture you” (or something like that) or maybe even the other Mafia sense of “pay us money and we’ll go torture your competitors”.
Because Teleservice could really only be said to be offering “protection” in the Mafia sense. Plus they are probably a lot worse than the Mafia.
I did not get the impression from reading Rothbard’s article that he meant “protection” in the Mafia sense.
Leaving only a quick comment for now because I just had another exhausting day. Don’t mean to ignore the other stuff you said, will just have to get back to you later.
“… or “protection” in the Mafia sense of “pay us money or else we’ll torture you …”
That’s my point.
What’s the likelyhood that a governent with an interest in protecting a politically-protected cartel is going to allow *the largest* private security company to provide security against violence and theft, including against government violence?
It looks like Teleservice has an interest in doing some of the government’s work. At least sometimes.
Also, with regard to Mafias, America had this problem especially during Prohibition (alcohol prohibition), and the Mafia problem started going away after it got off of people’s backs about alcohol.
The restrictions on alcohol caused a shortage and, because of Supply and Demand is an economic law, lead to higher prices. Those who wanted to supply alcohol at higher prices also had to be capable of fighting the government.
Without the freedom for competitors to supply alcohol, the Mafia was able to use violence to secure their market share.
When the government stopped arresting people for drinking alcohol, competition cut into the Mafia’s market share and the violence started to subside.
The same thing would happen with diamonds.
This is like when the tobacco industry used to “debunk” claims that tobacco causes cancer. And yes, the EPA is bought out, the Obama administration was bought out, and the Biden administration is most likely bought out too. This is why I never vote either Republican or Democrat, only third party.
In one of his documentaries, Gasland 2 I think, Josh Fox actually interviewed some EPA official who admitted that the EPA was totally corrupt.
Here’s Josh Fox’s response to the people claiming to “debunk” him on the topic of fracking. Note the text description below the video, where he links a lot of his reference material.
https://vimeo.com/44367635
And saying that someone is wrong about their well water being polluted just because it’s not equally polluted every day is sort of like saying that someone is wrong about having been raped because their memory changes a bit from day to day. Issues with memory are a completely normal side effect of the PTSD resulting from events with rape. And changes it pollution level from day-to-day sound like a completely normal variation. Even on the surface, we see the appearance of a lake can vary greatly from day to day depending on how much silt is stirred up. Why should it be any different for underground water? No doubt there is more pollution stirred up on some days than others.
There are many many people saying their well water was fine before the oil or gas drilling came and that it became polluted afterward. If I was accused of murder and that many people testified against me, perhaps saying something like, “well, the two of them walked into that room alone together, we heard a shout and a bang, and after random person came out, the other guy was dead,” I would be found guilty. Especially if this happened on my different occasions and many different towns (if the police were really bad at catching me or something). But, because the oil and gas companies are rich and can buy so many people off, the same standards of evidence don’t apply to them.
Also, talking about how poor people need energy… like, it’s true, but it doesn’t mean they need oil or gas. For one thing, there are plenty of poor people throughout the world who have said that they need clean water and clean air more than they need so-called “development”. When their water and air are severely polluted, their existing livelihoods are destroyed, and that’s backwards progress, not forwards progress. And also, solar is quite affordable relative to oil and gas (even with all the subsidies that oil and gas get) when there’s no existing power line infrastructure. Yes, the centralized oil and gas facilities can take advantage of power lines, but without power lines, it’s way more affordable for someone in Kenya to just install a solar panel. (Which they can apparently do on a payment plan that actually saves them money relative to buying kerosene.) And I also recall seeing about how solar water heaters were bringing hot water to poor houses in the world that didn’t previously have hot water. This can be done without actually converting the solar into electricity. The solar just heats the water directly.
Typo correction: on *many* different occasions, not on *my* different occasions.
Solar outshines kerosene in Kenya:
https://www.aecfafrica.org/news/story/Solar_outshines_kerosene_lanterns_as_rural_community_turn_to_green_energy_for_lighting
https://www.latimes.com/archives/la-xpm-2009-sep-06-fi-china-solar6-story.html
Guest wrote,
You are familiar with the term arbitrage? Arbitrage is when you buy something at a lower price and sell it at a higher price. So, a lot of retail, whether online or in a physical store, is arbitrage. The retailer buys products at a lower price and sells them again at a higher price. So, for example, if I buy a $65.95 mini-greenhouse, I might resell it for $89.99. Or something. Whatever I sell it for, it needs to account for the costs of shipping, taxes, whatever other fees I might have to pay, and still have enough margin to actually pay myself for the work of selling it (i.e. advertising work).
I don’t know, if people didn’t like paying the marked-up prices retailers charge, they could always go buy stuff direct from the manufacturers, but for whatever reason people still buy from retailers, perhaps because we offer things like decent shipping times and pretty websites. Or whatever.
If I can’t sell something for a high enough price to be able to cover my costs and still be able to pay myself at least a little, then it’s not worth selling, from a business perspective. Now, there are exceptions, like maybe if I am paying a monthly fee to warehouse something that isn’t selling, and I just want to sell it quickly to get it out of the way to make space for something better. But, if I put something on sale to get it out of the warehouse quickly, it means I made a bad business decision buying it to begin with, and it’s going to cost me. On the other hand, if I’m just drop shipping something (i.e. not buying it from my supplier until the customer buys it from me), it’s best to just delist the product if no one wants to buy it at a price that is profitable to me.
Maybe, from a moral perspective, I might want to give some things away for free or sell at a loss to people who have recently escaped from forced labor, or are suffering from cancer, or whatever, but that’s charity, not business. Plus the charity would need to be funded by profits from business, whether my own business, or someone else’s business profits that they donated to me.
So, if I ever sell something for less than my costs, it is either because I made a business mistake or because I am doing charity and not business, yes?
For Shell to sell gas to Nigerians rather than burning it, there would be costs. Costs of transporting the gas and building facilities that turn gas into electricity. So, I haven’t done the math myself, but I guess Shell had done the math and concluded that after all the costs of turning gas into electricity and delivering that electricity to Nigerians were taken into account, the price they would need to charge to make a profit rather than a loss would be more than Nigerians could afford.
So, from Shell’s perspective, it is better to make no profit on the gas than to make negative profit on the gas.
But then, there are also moral implications here. This gas flaring is highly toxic to the surrounding air and water. So Nigerians and their crops get poisoned. People get sick. Miscarriages happen. People die prematurely. So Shell is guilty of murder.
If Shell were actually held accountable for murder, they would probably see the calculation differently. In Texas, I think there’s still the death penalty for murder. I’m not sure what the traditional penalties for murder are in Nigeria. But, some sort of penalty — death penalty, prison penalty, big cash payments to the families penalty, something. That would change Shell’s profit calculations.
But Shell is too powerful. Shell is more powerful than a court in Nigeria that ruled that Shell’s gas flaring was illegal and that Shell had to stop. A court in Nigeria made this ruling, but Shell is more powerful than the court, so they continued with their murderous ways.
And, many Nigerians would prefer that Shell simply left rather than use the gas to sell electricity to them. But Shell earns more from poisoning Nigerians than they would from charging Nigerians to leave them alone.
And even supposing that Nigerians could afford to pay Shell to leave them alone. Perhaps exchange their labor for Shell not poisoning them. What would that be? Forced labor. Admittedly, it would be an unusual form of forced labor. I don’t think I’ve ever heard of forced labor carried out under the threat of “Work for us or else we will poison you with gas flares.” But, if that were to happen, it would be forced labor. See, even threatening to poison people with gas flares is very bad, and actually doing it is definitely very bad.
Guest wrote,
The “central planner” in Nigeria is Shell and the other oil companies, not the Nigerian government. The Nigerian government has ruled that gas flaring is illegal and that Shell has to stop. (Or a Nigerian court, at any rate… government is an abstract concept anyway, and the concept tends to break down when different branches of the so-called “government” are off doing their own things, contradicting other parts of the so-called “government”.) But the Nigerian court has no power to enforce their ruling. Shell is more powerful. So the central planner is Shell. There aren’t any regulations in their way, other than the ones they impose on themselves, because they have enough power to ignore any regulations they don’t like.
Since Shell is the central planner, the profit motive problem is one and the same as the central planner problem in this case.
It was also like this with King Leopold II’s brutal rule of the Congo. King Leopold II was the central planner, and he was also motivated by profit, and in the process of being the central planner while being motivated by profit, he killed off approximately half the Congolese population.
“For Shell to sell gas to Nigerians rather than burning it, there would be costs. Costs of transporting the gas and building facilities that turn gas into electricity.”
In what sense are Nigerians “too poor” to afford Shell’s gas if they don’t even have the buildings that turn gas into electricity?
Are uncontacted tribes “too poor” in this sense, too? They can’t use the gas, so they don’t need to buy it.
Also, if it’s important enough for Nigerians to get the gas, freedom will allow them to acquire the tools to get it.
Shell doesn’t have to do a thing – the Nigerians can just offer their labor to build the buildings and tools necessary.
You say, but they need equipment. Well that’s equipment that freedom would allow Nigerians to work for.
And where are the foreign businesses that would love to make a profit off of Shell’s desire to sell their gas to Nigerians.
So freedom would solve not only your gas flaring issue, but also would reduce poverty.
“The “central planner” in Nigeria is Shell and the other oil companies, not the Nigerian government.”
BS. Shell isn’t keeping foreign competitors from hiring cheap labor in competition with them – it’s the government.
What you’re describing has already been tried in America, and because the government (at one time) was generally pro-liberty, businesses with high market-share were forced to compete with startups, and they hated it so much they had the government introduce anti-monopoly and anti-trust laws.
(Yes, those laws were protectionist in design and effect.)
Those laws did not protect smaller businesses, which couldn’t meet the regulatory compliance costs, and therefore those with already high market shares had government protections from competition.
(Not that there’s anything wrong with high, or even exclusive, market share, if all the business is voluntary.)
Dominick Armentano: The Case for Repealing Antitrust Laws
[www]https://www.youtube.com/watch?v=xBT-fnJsfo0
Here are some other videos that help expose the government as the source of problems that get blamed on the free market:
The Robber Barons and the Progressive Era | Tom Woods
[www]https://www.youtube.com/watch?v=-VA9VZeox3g
Myths and Facts About Big Business (Lecture 8 of 15) Thomas E. Woods, Jr.
[www]https://www.youtube.com/watch?v=SGeA1Sbd4XM
The fact is that the Nigerian government is anti-freedom, and that’s why Nigerians are suffering.
What sort of freedom are you talking about? Freedom from murder? Freedom to commit murder?
Nigerians do not have freedom from murder because the Nigerian court it too weak to enforce its ruling that Shell’s murderous gas flaring activities have to stop. Shell does have the freedom to commit murder, because they are powerful enough to just ignore the Nigerian court.
How so? The court in Nigeria has no power to enforce its rulings. See the “Poison Fire” documentary I linked.
The Nigerian government also does nothing if Shell doesn’t pay their workers for several months. Which has happened. I looked it up just now.
http://www.industriall-union.org/shells-hidden-shame-contract-workers-on-the-poverty-line-in-nigeria
If Shell can get away with not paying workers in Nigeria for months, I’m sure other foreign competitors can get away with it too. There is, effectively, no minimum wage there, at least none that is being enforced in the case of powerful corporations like Shell. (And given what I’ve seen about the power level of the Nigerian government, I’d be surprised to see minimum wage enforced anywhere in Nigeria.)
Actually, looking briefly at your videos, maybe it wasn’t minimum wage you were talking about, by I think my general point that the Nigerian government has effectively no regulatory power over big foreign corporations, and probably not much regulatory power (if any) over smaller companies either, still holds true.
Remember, regulatory power does not come from pieces of paper. It comes from will plus actual enforcement ability.
In contrast, consider the regulatory power that Shell has over Nigerian farmers. Shell apparently has the regulatory power over Nigerian farmers to require them to grow their crops under toxic conditions. And the regulator power over Nigerian fishers to kill their fishes with toxic poison. That’s a lot of regulatory power. Shell is regulating a lot of small farming and fishing businesses into extreme poverty.
Also, Shell appears to have more power over the Nigerian military than the civilian portion of the Nigerian government does. This is part of where the abstract concept of “government” breaks down. If the Nigerian court has no power to enforce it’s rules, and the Nigerian military does not back up the court’s rulings, but the Nigerian military will apparently enforce the will of Shell, or whomever the highest bidder is, then what, exactly, is the government? Modern western conceptions of government just don’t seem to apply in this case.
You can see I am not making this up.
“Shell oil paid Nigerian military to put down protests, court documents show: Secret papers reveal that in the 1990s the oil giant routinely worked with the army to suppress resistance to its activities”
www [dot] theguardian [dot] com/world/2011/oct/03/shell-oil-paid-nigerian-military
I will try to look at your Youtube videos later when I have more time, but the ones with searchable transcripts didn’t say anything about Nigeria.
I think maybe Shell is the real Nigerian government, and the court that ruled that Shell has to stop gas flaring is some sort of anarchist court with no real power.
“Shell does have the freedom to commit murder, because they are powerful enough to just ignore the Nigerian court.”
Shell isn’t powerful enough to ignore economics. No company can. Sheesh.
*Where are the competitors to Shell, or alternative job opportunities?*
You can’t say companies are greedy enough to murder and enslave people, while at the same time say that they are *not* greedy enough to compete for another business’s laborers.
Shell can’t keep competing businesses out of Nigeria – only the government can do that.
“… but the ones with searchable transcripts didn’t say anything about Nigeria.”
They don’t. They weren’t intended to speak to Nigeria, specifically, but rather to economics in general.
Like the logic I mentioned above.
The socialist mindset is internally inconsistent as well as oblivious to how value works.
The policies socialists believe in are what causes poverty.
Free market policies have no flaws, but they do not create a Utopia – because people, themselves, are flawed. Merely pointing out that some bad actors did bad does not mean that socialist policies are an acceptable alternative.
(That last paragraph was more for Richard Wolff fans, who Gene Epstein says has the habit of criticizing capitalism without offering explanations of how socialism solves these problems [caused by a lack of adherence to free market policies, mind you].)
Guest wrote,
Alright, so I watched this video, and I don’t see how it’s relevant to Nigeria. Since you introduced it with “Here are some other videos that help expose the government as the source of problems that get blamed on the free market,” perhaps you only meant it to be loosely related anyway. But it really just doesn’t seem that related. Tom Woods talks about corporations either getting government subsidies or not getting them. He doesn’t talk about corporations bypassing the government and taking their own subsidies by doing the violence themselves.
The Nigerian government has very little in common with the US government. That’s not to say they have nothing in common, but it’s dangerous to assume that just because the government is a certain way in the United States, that it’s the same in Nigeria. Even in the United States, the government often doesn’t work the way a lot of people think it does. But anyway, the United States government is a world power. It’s messy and it’s complicated, and the term “government” is just an abstract concept, but, abstract concept though it may be, there is real power in the United States government.
The Nigerian government, on the other hand, is very very weak. And the power it does have, its military, is often for sale to the highest bidder, apparently. Including Shell. So, the Nigerian government doesn’t really have power over Shell so much as Shell has power over the Nigerian government.
This is why it’s very important to remember that “government” is just an abstract concept. The abstract concept is usually used to describe how people cooperate with each other to hold power. But then there are other people who also cooperate with each other to hold power who for whatever reason we don’t label as government. Ultimately, a government has all the power that the people who make up the government have. And it’s the same with a corporation, a corporation has all the power that the people who make up the corporation have. But even then, only to the extent that they actually cooperate with each other, otherwise the concepts break down. Essentially, governments can commit violence because the people who are part of the governments can commit violence, and corporations can commit violence because the people who are part of the corporations can commit violence. If a person has the ability to raise their first and hit someone else, that person has the ability to commit violence. If a person has the ability to hold a machine gun and use it to fire bullets at people, that person has the ability to commit even more violence. And ultimately all this comes from the laws of physics, and the laws of physics don’t care about our abstract concepts like “government” or “corporation”.
Shell has the ability to commit violence because it is made up of people with the will and the ability to commit that violence. And so they murder together. The Nigerian government does not have the ability to stop Shell from committing murder because they do not have the will and ability to stop Shell. Part of this is because the Nigerian government is so disunified that we probably shouldn’t even be calling it a government. A bunch of the military people in the Nigerian military apparently want to accept paychecks from Shell to commit violence on their behalf. So those people don’t have the will to stop shell. And then there’s the Nigerian judge who ruled that Shell’s gas flaring is illegal, and Shell has to stop, but the judge doesn’t have the power to stop Shell. So, basically, there’s no group of people in Nigeria with both the will and the ability to stop Shell’s murder spree.
Maybe that could change if Nigeria got a powerful general with the military prowess of Hannibal, and an interest in stopping Shell. (Hannibal was a brilliant, though not necessarily moral, Carthaginian general who opposed Rome. He is known for his victory at the battle of Canae. At the battle of Canae, Hannibal’s smaller army crushed a much larger Roman army.) Or, you know, maybe a pacifist with the tactical brilliance of Leymah Gbowee, who won a Liberian Civil war using non-violent methods, successfully defeating both the murderous raping government forces and the murderous raping rebel forces. Like, some brilliant tactical leader could theoretically completely change the balance of power. But as things stand, Shell has the power to get away with mass murder.
It’s important to remember that the abstract concept of “government” has evolved over time. My guess would be, it started with raiders. Some people figured out that they were better at violence than they were at farming, so they likely started raiding the farmers. Over time, the raiders probably learned that the farmers resisted less if they made up some excuse about how the farmers had a duty to pay taxes, and the farmers probably learned that if they resisted less they got killed and tortured less, and things probably evolved from there. Note that I am guessing to a certain extent, but not completely. I’ve read a number of examples of what looked like straight up raiding activity to me was labelled as some sort of tax. For example, the Belgian colonial government used to raid the Congolese, looking for people to carry off into forced labor. However, to give this a veneer of legitimacy on paper, they called it a head tax. And there was bureaucratic paperwork. Additionally, if you look from the time from when King Leopold II started his brutal rule over the Congo, until the time when Belgium granted Congo independence (at least on paper), there were various “taxes” (essentially legal excuses for forced labor, in this historical context) throughout the entire time, but enforcement gradually became less violent as a) the Congolese people gradually resisted less over time and b) the Belgians (and other Europeans who participated) were motivated the reduce the violence of the enforcement, because the earlier methods were killing people so fast that if continued, there would have been hardly anyone left to force to work for them. Which I think supports my theory of the raider origin of government.
But see, the constitutions, the laws, the courts, the organizational structures we associate with the term government, these things aren’t necessary for the basics of raiding, of powerful people taking what they want by means of violence, to occur.
So, as long as they hold power, Shell does not need constitutions or laws or courts in order to conduct raiding activity. They only need the power to get away with it. Which apparently they have. So Shell raids oil out of Nigeria, killing and sickening Nigerians by means of gas flaring, and then hires the Nigerian military to put down protests for them. Raiding. Not government subsidies, except in so far as raiding is a sort of proto-government activity.
Also, when Tom woods goes on about how specific business people campaigned legislators for bad laws, and got rich off of it, they got money that did not accurately reflect their contribution to the world. Likewise, when the legislators got “wined and dined” (or whatever), they also got material benefits (in which money was probably involved) that did not accurately reflect their contribution to the world. (Note: I think that was in the “The Robber Barons and the Progressive Era” video, but I could have mixed it up with the other Thomas Woods video you linked.)
So, even though I’m failing to see what this has to do with Nigeria, it still proves my earlier point that money, if it is intended as a reputation management system, has some serious security flaws that allow certain people to acquire large amounts of money by doing bad things (if not outright evil things).
“… and I don’t see how it’s relevant to Nigeria.”
Looks like you missed my previous post, in which I said, “They weren’t intended to speak to Nigeria, specifically, but rather to economics in general.”
Economics in Nigeria being a subset of “economics in general”, these videos explain, again, how governments are responsible for the problems that get blamed on free markets – even in Nigeria.
Or on the moon, or on Mars.Socialism / central planning wouldn’t work anywhere. Because of economic laws.
“But see, selling stolen stuff at below *someone else’s* cost is very different than selling legitimately acquired stuff at below *your own cost*, so the things that make it hard to do the latter don’t work against the former.”
First, I realize this is from a separate post, but I think it gets to the heart of your disagreement with me.
And second, I appreciate that you’re able to see that economic claims can apply to Nigeria even though the claims may be drawn out from experiences in other countries.
That’s progress.
OK, so about your claim that “the things that make it hard to do the latter don’t work against the former.”.
First of all, no, Tom wasn’t saying that “selling below cost” was problematic. “Costs” are objective, but only to the subjective ends to which they apply. So the concept of “below cost” depends on the ends of the business owner.
I say this so that we can avoid making the mistake of saying that “low prices” are problematic, or that driving out your competitors with low prices is problematic – because neither are problematic, in themselves.
Ultimately the consumer – not the “low pricer” – is determining where they’d like to spend their own money. And that’s their right, to which smaller businesses (say Mom and Pops) have no say. The businesses that go under because of low-pricing were only in business before because they previously had the best deals at the time, according to consumers.
Nobody has a right that compels consumers to shop at their store.
Anyway, so the reason what you’re saying about stealing and selling below someone else’s costs doesn’t work is because eventually those whose merchandise is being stolen will stop selling them, or move somewhere else to sell them.
We’re starting to see this in California, where SJW-inspired laws result in people openly shoplifting, and businesses deciding to shut down.
Or, those that can afford to, they are locking everything up to discourage shoplifting.
—-
“… a very dark aspect of US railroad history that Thomas Woods leaves out is forced labor in many coal mines.”
He left it out because that wasn’t the topic.
He was addressing the widespread government-education-fueled, false belief that large firms, by their nature, are exploitive.
My point in bringing that video up was that being large and/or free-market does not give you power to do whatever you want – because there are economic laws that prevent you from doing so.
Slave labor is inefficient compared to those working for profit. So eventually, if you leave businesses alone, the profit motive will take away their market share.
Take the Jones Act, which, according to Investopedia, “requires goods shipped between U.S. ports to be transported on ships that are built, owned, and operated by United States citizens or permanent residents”.
This is the reason Puerto Rico suffered so badly after Hurricane Maria (under Trump, and even though he waived the law, temporarily).
The Jones Act Waiver For Puerto Rico Just Expired And Won’t Be Renewed
[www]https://www.huffpost.com/entry/puerto-rico-hurricane-maria-jones-act_n_59dba977e4b0b34afa5b36e6
Imagine how much more wealthy Puerto Ricans (and other Americans) would be with the free flow of goods.
I don’t understand why you think this is relevant to Nigeria. If the Nigerian court tells Shell, “Thou shalt not murder thy competitors,” is that an anti-trust law? I don’t think, “thou shalt not murder” is what people typically have in mind when they talk about anti-trust laws. And even if it is somehow an anti-trust law, it’s not like the Nigerian court has any power over Shell anyway. The Nigerian court tells Shell to stop murdering its competitors by means of gas flaring, and Shell just ignores the Nigerian court.
Around 20 minutes in, Dominick Armentano starts talking about how good laws are those which protect individual rights and property rights. (I did not record his exact wording, this is just a summary as I understand it.) It does not sound to me like he is against anti-murder laws. And that is what the Nigerian court ruling is, basically. An anti-murder ruling. (Albeit one the court apparently lacks the ability to enforce.) Gas flaring is a violation of of people’s right to not be murdered or physically attacked resulting in injury, and it’s a violation of the rights of the Nigerian farmers and the fishers and the other people to the land. Whether the Nigerian farmers and fishers and other people working the land in the Nigeria have ownership rights or stewardship rights over the land (depending on your perspectives on the proper relationship between people and land), either way, gas flaring is a violation of those rights. And it’s a violation of the rights of mothers to protect their babies from forced abortion. (Whether you are pro-life, or pro-choice, with respect to unborn babies, it is my understanding that both pro-life and pro-choice people agree that forced abortion, without the consent of the mother, is wrong.)
Around 49 minutes in he mentions that anti-trust laws are primarily a United States thing. He mentions that, for example, although Japan technically has anti-trust laws on paper, they aren’t really enforced in Japan and for the most part the Japanese ignore them. He doesn’t specifically mention Nigeria, but so far as I can tell, Nigeria either doesn’t have anti-trust laws, or else doesn’t have the power to enforce them.
Around 51 minutes in, he states that although he would have preferred AT&T to be broken up by means of deregulation rather than anti-trust laws, there was a certain amount of justice there since AT&T was a strong proponent of government regulation and benefited from said government regulation. So, he acknowledges that corporations can do bad things. In AT&T’s case, the bad things were advocating government regulation and benefiting from those regulations. (I haven’t specifically looked into AT&T much myself, just summarizing what Dominick Armentano said as I understand it. Although I do recall reading something awhile back about how the telecoms were paying for 5G out of government subsidies that were intended to bring broadband connectivity to rural areas, but never actually spent that way and just pocketed instead.) In Shell’s case, the bad things were poisoning people with gas flares, resulting in a number of deaths (murders) and injuries, and also paying the Nigerian military to repress protests. But, if I accept what Dominick Armentano said about AT&T, clearly not a nice company, and if you accept what I say about Shell, again, clearly not a nice company.
Guest wrote,
I don’t see how this one relates to Nigeria either. (Edit: by the time I got to writing my final two paragraphs of this comment, I finally saw a connection, but leaving this here to show my train of thought.) Although Thomas Woods seems to agree with me that selling things below cost is, generally speaking, a bad business strategy. Like, if someone is selling below cost, some dropshipper or other reseller can just use the person selling below cost as their supplier.
Although, if “predatory pricing” means selling things below cost, then there is a type of predatory pricing Thomas Woods doesn’t discuss. (I don’t know what “predatory pricing” would be the term used to describe selling things below cost, but that seems to be how Thomas Woods is using the term, so whatever.) And that is when thieves (or people who do business with thieves) sell stolen goods at below someone else’s cost. So, for example, say you have a shoplifter. And there’s a store that acquired a dress for $90 and is trying to sell it for $120. And then a shoplifter steals this dress, and then turns around and sells it for $40. So, the shoplifter just sold the dress for $50 less than what it cost the store to acquire it, and $80 less than what the store was trying to sell it for. This definitely hurts the store. And, unless the store was trying to sell a stolen dress to begin with, its probably unethical.
Now, I don’t think shoplifting is all that popular. But there is another type of theft that does occur very frequently: forced labor. So, with forced labor, the thief is acquiring the labor for less than what it would take to hire voluntary labor. In some cases, the thief might also be acquiring a greater number of laborers than could be hired voluntarily in that particular industry. For example, practically no one would agree to voluntarily work as a prostitute and service 20 customers per night. That just doesn’t happen. Perhaps, in a world of over 7 billion people, it has happened sometime, somewhere, but statistically it is very unlikely to happen hardly ever if at all. However, someone forced to work as a prostitute can be raped by 20 customers per night. (For some examples, see the chapter on Thailand in “Disposable People” by Kevin Bales.) That sort of thing does happen a lot. And that really puts the “predatory” in “predatory pricing”
And following this train of thought, I see what this has to do with Nigeria. Shell is a thief. Since Shell is acquiring oil by murderous means, the acquisition is illegitimate, and Shell does not have valid moral title to the oil. It is selling stolen oil at below the cost *to other people*, but not below the cost to itself. But see, selling stolen stuff at below *someone else’s* cost is very different than selling legitimately acquired stuff at below *your own cost*, so the things that make it hard to do the latter don’t work against the former.
And that is something Thomas Woods didn’t take into account.
Considering US history (as opposed to Nigerian history), a very dark aspect of US railroad history that Thomas Woods leaves out is forced labor in many coal mines. Basically, after the Civil War, forced labor became unconstitutional, but still effectively legal in so far as many police and judges found a huge gaping loophole big enough to drive a continent through in the 13th Amendment that says, “except as a punishment for crime.” So, what they did was they criminalized a bunch of totally ridiculous stuff, like selling cotton after sunset, or using abusive language in the presence of a white woman, and continued torturing labor out of black people (as well as a small number of white people) under the pretext of convicting them for these so-called “crimes”, often without any real evidence. In some cases, the so-called “crime” was “not given”.
One specific example that Douglas Blackmon gives in a book he wrote is the Tennessee Coal, Iron & Railroad Company, which was a subsidiary of the U.S. Steel Corporation. In his book, “Sl***ry by Another Name”, Douglas Blackmon goes into great detail on this topic.
There’s also a documentary, based on the book, and sharing the same name.
https://vimeo.com/182446841
Thomas Woods also barely mentions the the destructive impact of the railroads on American Indian civilizations. Although he does mention land grants to railroad companies. A brief internet search confirms that many of these lands given by the US government to railroad companies were stolen lands.
americanhistory [dot] si [dot] edu/blog/TRR#:~:text=The%20Transcontinental%20Railroad%20dramatically%20altered,aspect%20of%20Cheyenne%20economic%20life.
“Prisoners with jobs”
It’s a very old question, the ancient Romans would send prisoners to the salt mines as punishment, then take that salt and use it to pay the military.
Not much changes … 2020 has been all about criminalizing a bunch of ridiculous stuff. In Melbourne the police nab old ladies for sitting on park benches and they break into people’s homes for saying the wrong thing on social media. In West Australia they arrest people for not wearing a mask in public.
I think criminalizing ridiculous stuff and/or dropping the standard of evidence for conviction to basically nil is likely the oldest excuse in the book for forced labor regimes.
Regarding the Romans, reasons for being condemned to the mines (often metal mines) included either being Christian (pre-Constantine) or being what the Roman Empire considered the wrong kind of Christian (post-Constantine).
jstor [dot] org/stable/1509967
An article from 2013 mentions Australian prisoners being forced to work at some salt mine. The article mentions that “only inmates in the lowest security classifications” can take part in these forced labor programs, so these are likely the people sentenced for whatever the ridiculous crimes were in Australia in 2013, not the ones sentenced for serious crimes. Which makes sense, when you think about it. If you were a prison guard, would you really want to hand a piece of mining equipment that could potentially be used as a weapon to someone who was actually a violent criminal?
https://www.abc.net.au/news/2013-09-12/union-says-prisoners-working-at-nt-salt-mine-27like-slave-labo/4952642
On an off-topic, but related post – which no longer allows comments, and so I’m doing it here:
Paul Krugman, Inflation Denier
[www]https://consultingbyrpm.com/blog/2011/05/paul-krugman-inflation-denier.html
Bob said:
“David, the major piece of investment advice I gave on this blog was to tell people to stock up on gold and silver in the fall of 2008. Anybody who did that sure as heck is glad he did.”
David S. replied:
“Bob, you celebrating being right for the wrong reasons on gold and silver should seal it even in your eyes. How much of that advice was based on your exactly wrong inflation prediction? Did you know the gold supply’d been falling since around 2000, going on 11 years now? lol”
Bob was right. Here’s hoping that David S. gets to see this:
Wall Street Bets Legit Learning About Silver
[www]https://www.zerohedge.com/news/2021-03-24/wall-street-bets-legit-learning-about-silver
“If you are paying real attention to the silver bullion market in 2021, the WallStreetSilver story is one you have to monitor to have a real idea for burgeoning the forces at work.
“The story is so big, the even still today, mainstream financial media like Business Insider have to cover it to stay relevant.”
From the linked Reddit article:
[Title] “SLV is a complete scam, its a scalp trade set up by banks to screw over investors. Avoid it at all costs. The silver market is and has been rigged for years …
“… But no real open market purchases of silver are occurring. Instead, JPM (and a few sub custodian banks) accumulated a large amount of silver, segmented it off into LBMA vaults, and simply trade back and forth with the ETFs as they receive inflows. Thus, ensuring that ETF inflows never actually impact the true open market trade of silver. …”
“… The real issue here is that purchasing SLV doesn’t actually impact the market price of silver one bit. The price is determined completely separately on the futures exchange. SLV doesn’t purchase futures contracts and then take delivery of silver, it just uses JPM as a custodian who allocates more silver to their vault from an existing, controlled supply. This is an extremely strange phenomenon in markets, and its unnatural.
“For example, when millions of people buy GME stock, it puts a direct bid under the price of the stock, causing the price to rise.
“When millions of people put money into the USO oil ETF, that fund then purchases oil futures contracts directly, which puts a bid under the price of oil.
“But when millions of people buy SLV, it does nothing at all to directly impact the price of silver. The price of silver is determined separately, and SLV is completely in the position of price taker.”
This relates to our earlier debates about gold. It’s from the book “Forced Labor in the Gold and Copper Mines: A History of Congo under Belgian Rule, 1910 to 1945, Volume I” by Jules Marchal.
skipping down a few paragraphs…
Come to think of it, that also relates to our earlier conversation about railroads. Admittedly, the above concerns Congolese railroads, not United States railroads.
What does slave labor in gold mines have to do with misrepresenting the use-value of gold by way of inflating the number of IOUs for gold above the supply?
The value of gold would be misrepresented whether slave labor was used or voluntary workers.
Look, contrary to your belief that money is used to represent status, sound money (money that has a use other than money) gets its value from the arbitrage opportunities created by people trying to satisfy their ends – that’s why sound money has a coordinating effect.
If I want to build something on my property, and I start buying materials to do so, my purchases show that I am willing to spend X on this or that – and that creates a potential arbitrage opportunity for someone who is able to make a profit selling to me at below X.
If someone starts to supply me for below X, everything he does to make that trade with me possible also becomes a possible arbitrage opportunity for someone else.
And so on.
And when arbitrage can be gained by supplying more than one customer, you begin shrinking the number of goods that are needed to make trades possible – eventually resulting in money.
And when you introduce unbacked IOUs of any kind, you mess the coordination up, because it’s no longer supply and demand that’s driving trade, but misinformation about the supply of sound money that’s doing it.
Unbacked IOUs treat sound money like they’re tokens. Sound money is chosen because it has already satisfied someones ends and can do so in the future (salt and gold are examples, with salt becoming so abundant it could no longer be used as money [but now we have cheaper salt, which is good]).
You can’t represent sound money with token money – you can only make an IOU ouf of token money to be redeemed in sound money. And then the IOU is only as good as the willingness of the issuer to redeem it.