Did the People Reject the Gold Standard?
When I was googling something on the classical gold standard, I came across Brad DeLong’s book (?) on the economic history of the 20th century. In his discussion of the gold standard before World War I, he writes:
It is important to recognize that the gold standard was a historically-specific institution. The cornerstone of the gold standard was the commitment by all industrial-economy governments and central banks to maintaining convertibility of their currency. The pressure that twentieth-century–democratic–governments would feel to abandon currency convertibility and the stable exchange rate peg in order to boo[s]t employment or attain other economic objectives was simply absent. The credibility of the government’s commitment to the gold standard rested on the denial of the franchise to the working class. As long as the right to vote was still limited to middle and upper-class males, those rendered unemployed when the central bank raised [its] discount rate and tightened monetary policy had little voice in politics. As long as union movements remained relatively weak, the flexibility of wages and prices that would allow the gold-standard system to quickly readjust to equilibrium was present.
Later on these two preconditions for the functioning of the gold standard would erode, and the gold standard would cease to be a politically and economically-feasible institution.
Although DeLong writes in a neutral tone, as if he is simply reporting facts, there is clearly a dig at the gold standard here. He isn’t simply saying that it failed because of XYZ, DeLong is also saying that the only way the gold standard “works” is to screw over the powerless.
In any event, I think his history is simply wrong, at least with respect to the United States. FDR didn’t campaign on ending the gold standard. Here was the Democratic platform for the 1932 election, as reported by Scott Sumner:
The Democratic Party solemnly promises by appropriate action to put into effect the principles, policies, and reforms herein advocated, and to eradicate the policies, methods, and practices herein condemned. We advocate an immediate and drastic reduction of governmental expenditures by abolishing useless commissions and offices, consolidating departments and bureaus, and eliminating extravagance to accomplish a saving of not less than twenty-five per cent in the cost of the Federal Government. And we call upon the Democratic Party in the states to make a zealous effort to achieve a proportionate result.
We favor maintenance of the national credit by a federal budget annually balanced on the basis of accurate executive estimates within revenues, raised by a system of taxation levied on the principle of ability to pay.
We advocate a sound currency to be preserved at all hazards and an international monetary conference called on the invitation of our government to consider the rehabilitation of silver and related questions.
And Scott’s post itself is a discussion of the (famous) problem that nobody knew what was going to happen to the gold standard after the election in November but before FDR’s inauguration (which was in March in those days). So at best FDR was being coy about the gold standard. He certainly didn’t get elected on a promise to end it. (Even this site, which is definitely coming from a different political angle compared to Sumner, at most can say that although FDR campaigned on a sound currency, he never promised to stay on the gold standard.)
Furthermore, when the US did “go off gold,” people were forced to turn their gold over under threat of a 10-year prison sentence and a huge fine. Sure, a lot of fat cats were inconvenienced, but I imagine a lot of regular Joes had to turn in their gold too. So this wasn’t the analog of a South American land redistribution.
These tendencies carry through to our times, as well. If you ask the man on the street, “Do you favor a strong or a weak dollar policy?” what is he going to say? Furthermore, if you ask, “Most economists agree that TARP and the Federal Reserve’s injection of more than $1 trillion into big banks saved the financial system and averted a second Great Depression. What do you think?” I suspect a lot of the “working class” would say, “Screw the bankers!”
So my point is, I think the general public, even the working class, is OK with a strong currency as epitomized by the gold standard. They might be wrong in that view (I don’t think so), but DeLong’s narrative doesn’t really work for the U.S.
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“So my point is, I think the general public, even the working class, is OK with a strong currency as epitomized by the gold standard.”
Maybe in the rhetorical sense(a weak currency implies a weak nation,), but they are not OK with high unemployment and real debt burdens. A loss of purchasing power matters little if your job / house / 401k is on the line.
I think it generally holds that “capital” (not in the modern specualtive, state-connected sense) prefers a strong currency and “labor” prefers a weak currency. Since labor gets more votes than capital, democratic regimes tend to be inflationary – or at least try to be.
Jon O., of course the public doesn’t like high unemployment. But DeLong (and you) are simply assuming that the public agrees with Keynesian solutions to that problem.
I’m saying that I don’t know that that’s really the case. The American public was not clamoring for a strong politician to come in and cut the fetters of gold. That’s why FDR had to be really coy about gold, and lie through his teeth about deficit spending. (He castigated Hoover as a big spender.)
Yeah, and what really “hurts the economy” is how, after you’ve given the speech, it might become oh-so-much-more burdensome for the client to pay (i.e., they want to stiff you), and yet the value of money doesn’t sharp fall to ease this burden!
Just like deflation hurts mortgagees, sound money hurts people who want to **** Bob out of his fees. Inflation FOREVER!
Fair enough but I think most people, insofar as they think about these issues at all, tend to accept a basic Keynesian explanation (and thereby solutions) in the midst of the crisis. When everything was falling off the cliff in fall-2008 it wasn’t hard to connect the dots between contraction, panic, deflation, unemployment et al.
Except for a few everyone in the media, wall st., academia, the blogosphere etc. had some type of re-flationary policy they supported. As people watched the value of their homes and 401k plunge – and listened to the experts on the nightly news – they wanted a re-flation.
After the crisis is over its much easier to be an austerian.
Most people tend to hold contradictory views. On the one hand they feel gold is safe and like to think their money is “as good as gold” but on the other hand they want the state to suppor asset prices and employment. So, they basically want a strong currency and a weak currency, simultaneously.
My point is that if most people had a proper understanding of the pros-cons of a gold standard they would not favor it. Most voters want inflation, especially during times of crisis. The fact that they have an abstract affinity for gold too, doesn’t change this.
How do you explain the hostility of 90% of the voters being against TARP then even when all those groups you were mentioning kept telling them they needed it?
I think most people saw TARP as a direct bailout of the banks. Voters wanted a bailout for themselves.
Anyway, TARP was a drop in the bucket compared to Fed policy / programs. A (relatively) small bank bailout and direct monetary inflation are two quite different things. The former could happen under a gold standard, the latter couldn’t(not for any extended period.)
I don’t think you have it completely right. I agree that people opposed TARP because it was a direct bailout to the banks but I think it shows they are looking out for themselves. Why does the average guy on the street want inflation? They middle class and poor suffer most from inflation to begin with. Most don’t even understand inflation. It’s not that the average person sits around discussing the Bernanks latest move. If they even know who he is they just pray he knows what he is doing. If people like inflation so much, why do they riot when they get it?
DeLong distorting history? How unusual.
““Do you favor a strong or a weak dollar policy?””
You’re asking the wrong question.
‘Do you favor allowing the market to determine the value of the dollar’ is the appropriate question.
Here’s a thought..let’s allow the market to determine the value of the dollar and any other currency for that matter.
A strong and/or a weak dollar policy is bad policy.
And just aks the Europeans what they think of a convertable currency these days.
By wanting to return to the gold standard, or any other convertable currency, you’re not as free market oriented as you think you are.
AP Lerner wrote:
By wanting to return to the gold standard, or any other convertable currency, you’re not as free market oriented as you think you are.
Am too!
Guess what AP? I’m even a hypocrite in my personal business conduct. When people want me to give a talk somewhere, I tell them what “my fee” is. I enforce strict price controls on my speaking fees, and let quantity adjust.
Bob Murphy, price fixer!
Ha! We’ll see what happens to your price when the quantity falls to zero 🙂
(and for the sense of humorless, that is meant to be a joke, and is not a desire on my part for Mr. Murphy’s revenues to fall to zero)
Bob,
You are a monopoly and need to be broken up!
AP, isn’t gold technically a market?
“Here’s a thought..let’s allow the market to determine the value of the dollar and any other currency for that matter”
The market determines the value of gold. Thus, if the dollar were convertible to a fixed amount of gold, it seems like the market would indeed be determining the value of the dollar.
So, I am guessing the gold standard folks will agree with your thought.
Unless MMTers evaluate the variable “The Market” as (All Market Actors – Everyone Who Is Not Employed At The Federal Reserve).
Such mistakes have been made before.
“if the dollar were convertible to a fixed amount of gold”
how is the ratio of dollar’s to gold being determined by the market if the ratio is arbitrarily fixedly by the government? Why not let the private sector make this determination?
My larger point, however, is the entire concept of a ‘strong policy’ is rubbish. The market should ultimately determine the value of the currency. Just ask the Portuguese how they feel about the current strong Euro policy being forced on them by the Germans and the French. Talk about losing monetary sovereignty….
Wow, AP. You just sounded Austrian there for a moment. I agree with you.
In support of AP Lerner, I call as witness the ghost of Milton Friedman.
Hmm Blackadder, that is an interesting article by Friedman. I may have to do a Mises.org on it.
But for now, let me just point out that to “fix” the price of gold is NOT to impose a price control in the same way the government might cap apartment rental rates. The market is still determining the price of gold under a classical gold standard; the central bank adjusts the quantity of money to keep it pegged.
Bob,
But isn’t the same true of the Fed’s open market operations now? Technically interest rates are set by the market, the Fed just adjusts the quantity of money to keep the rate on target.
The Fed sets the Fed Funds Target Rate and then conducts temporary OMOs to keep the Effective Fed Funds Rate in line with the target they set.
Long(er) rates are a different story.
Right I actually de-escalated the first version of what I wrote because I realized that. One humongous difference is that under a classical gold standard, the government isn’t constantly meeting to decide what the peg should be for the next 45 days. So does that mean I’d be OK with the government picking the federal funds rate for all time?
I grant you that sounds worse to me than them picking the dollar-price of gold for all time, but the more I think about it, the less awful it seems. The rate of price appreciation on everything could adjust to make real interest rates whatever they need to be, given the fixed nominal rate. So as long as the initial peg were close to the market rate at that time (and maybe taking into account the way it would move because of the imposition of the peg), that actually might be a lot preferable to a discretionary monetary policy.
(By analogy with the gold standard, I’ve suggested Bernanke’s just start pegging the $ to gold at $2,000/ounce. But of course if he instead pegged it at $20/ounce, that would be awful for a while. So by same token, if they pegged the fed funds rate to 5%, that might work in my mind, whereas if they pegged it at 0.25% or at 100% that would be nuts.)
Does this make sense?
Bob, why have a peg at all. Why not just deal in weight, and then have any notes be issued to back the weight of the deposit? This is what screwed up the gold-exchange system in England after the 1st war, and then later the US system after the 2nd war.
Just let the paper be a receipt of weight, not a fixed exchange, and then there is no reason for Gresham’s Law or other exchange disparities to arise. The market decides the value of the currency just as they decide the value of any other good. After all, money is merely a good whose exchange value is prominent.
Joseph, not sure I follow you. If the Fed pegs gold at $2000/ounce, that’s the same thing as saying one dollar bill entitles you to 1/2000th of an ounce of gold.
I think it’s less a matter of the working class demanding an end to the gold standard as it is them demanding other things (low unemployment, wage security, etc.) that in DeLong’s view are inconsistent with having a gold standard.
Perhaps, but, in fairness, abolishing a gold standard is inconsistent with one’s preference that “Gee, I don’t like it when extremely well-armed muggers take my gold.”
Anytime you see “abolish the gold standard”, replace it with “take everybody’s gold savings” and see if the argument therefor [sic] convinces you.
A lot of folks are convinced by, “We would have a better economy if we abolished the gold standard.”
but not by
“We would have a better economy if the government looted people’s gold savings.”
One day, I aim to understand why.
Does leaving the gold standard require confiscating people’s private gold stores? I realize that this happened in the United States, but I’m not aware of it happening in other countries, nor is it clear why you would need to do this in order to get off gold.
If people held notes conditional on their convertibility to gold at a pre-defined rate, then however you go off the gold standard, you’re taking their gold.
Sorry, “if people held notes …”
(fixed)
Well, given that people continued to hold federal reserve notes after the U.S. had left the gold standard, it can hardly be the case that they were holding them conditional on the notes being convertible to gold at a pre-defined rate.
Even if people were holding their notes conditionally, describing going off the gold standard as “when extremely well-armed muggers take my gold” is rather strange. Suppose I buy a Star Bucks gift card entitling me to a free large coffee but when I go to redeem it they refuse to honor it. Now suppose instead that I bought some coffee but on my way home I get mugged and the coffee is taken from me at gunpoint. It takes a special sort of person not to be able to see the difference between the two situations.
I’m not sure I follow your logic: after FDR’s seizure, people weren’t allowed to hold any gold, and even if they were, the fact that they didn’t redeem their notes at the lower rate isn’t evidence that they didn’t hold the original notes on the basis that the _could_ be redeemed for 1/20 oz Au. How do you think they got people to hold the notes in preference to gold in the first friggin place?
And yes, there certainly is a difference between the mugger and the repudiating of the gift card, but you need to come up with a relevant difference when you try to bring them up as an example. (Great skill to have, btw) Whatever difference exists is not relevant to the question we were actually discussing, which was whether you are stealing from someone when you dishonor a condition of a transfer like the one described.
It’s stealing (with all the moral baggage it entails) when Starbucks takes my money in exchange for coffee and doesn’t give me the coffee.
It’s stealing (with all the moral baggage it entails) when a mugger takes my stuff.
And yes, it’s stealing with all the moral baggage it entails when the government trades a gold certificate for gold and doesn’t honor its face exchange rate.
The only reason anyone even bothers with the last kind of stealing is because it’s an easy way to rook people too stupid to see the equivalence to “canonical” theft.
Know anyone like that, Blackadder?
I’m not sure I follow your logic: after FDR’s seizure, people weren’t allowed to hold any gold
Right. My question was why doing this would be necessary if a nation was to leave the gold standard. Your answer (as best as I could discern it beneath the layers of snark) was that while going off the gold standard didn’t require governments to physically seize private gold supplies it did require it to suspend convertibility at the old price, which amounts to the same thing.
But they aren’t the same, any more than Starbucks not honoring a gift card is the same as a mugger stealing coffee from me at gun point. In the latter case the thing to do is to call the police and try to have the guy thrown in jail. But if I were to try that in the Starbucks case the cops would just look at me weird. (I could sue Starbucks, but even if I won my remedies would be civil, not criminal).
So you’re argument comes down to “No, it’s not stealing people’s gold when you dishonor the very promise you needed to make to get their gold in the first place because … um, calling the cops when Starbucks does it with coffee instead of gold is, like, weird and stuff. Oh, and the certificate holder is a different person. Yeah. Totally changes the dynamics”
Yes, there are different remedies in the present legal environment. Yes, the legal system lets retailers get away with fraud too often. I don’t know how you get from there to “so repudiating warehouse certificates isn’t theft when the government does it and the certificates are for gold”.
But hey, maybe you could enlighten me? You know, once you engage the issue?
(It’s pretty sad when I have to explain this to a Rothbardian.)
To clarify, and in response to point I *think* you’re making: no, going off the gold standard isn’t necessarily stealing if, for example, you first redeem all currency at its face rate or original promised rate.
But that’s not what anyone is suggesting when they advocate going off the gold standard: they crucial thing they want is the devaluation of the notes that people hold *right now*, not the ones they might start holding later under different conditions.
Hence, it’s not a relevant point for you to bring up, especially if you’re familiar with the fiat money opponents.
The government didn’t need to get any gold to start with. It just choose to set the price of its fiat money with a buffer stock of gold.
Those who catallectically exchanged their gold for notes did not calculate well the default risk associated if they expected to get their gold back at some point.
@mammoth:
Those who catallectically exchanged their gold for notes did not calculate well the default risk associated if they expected to get their gold back at some point.
Er, yeah, and you could say the same for anyone who buys any debt or warehouse security that isn’t honored: “You should have known you wouldn’t get paid, schmuck.”
That doesn’t mean that deliberately repudiating your debts somehow “isn’t theft” or “isn’t breaking a contract” or “is consistent with the rule of law when the government does it”.
If a bank loaned you money, would it correctly predict your probability of stiffing them?
What about Omega in the Parfit’s hitchhiker problem?
Silas,
My response is below.
BA wrote:
I think it’s less a matter of the working class demanding an end to the gold standard as it is them demanding other things (low unemployment, wage security, etc.) that in DeLong’s view are inconsistent with having a gold standard.
Oh, totally. But that’s my point BA: DeLong thinks he is neutrally reporting history, when in fact his narrative crucially depends on the accuracy of his economic theories. If the Austrians are right, then the gold standard would work just fine nowadays as well as back in the days of disenfranchisement.
Just so we don’t spend another 38 years, five months “debating” simple stuff like “what is intervention?” and “what is the free market?”, all you ADD afflicted etatists (pinkies-up for “statists”) need to read Rothbard’s “Power and Market” starting at page 1057. Those are the terms for the starting point of this debate. It’s a bright shiny line. It’s really not that complicated.
http://mises.org/Books/mespm.PDF
But that’s my point BA: DeLong thinks he is neutrally reporting history, when in fact his narrative crucially depends on the accuracy of his economic theories.
I’m not sure why you think DeLong thinks he is being neutral here. Surely the accuracy of a book on the economic history of the twentieth century is going to depend on the accuracy of the author’s economic theories (if I looked at your PIG guide to the Great Depression presumably I would find pieces of the narrative that depend on the accuracy of Austrian theories, right?)
I guess what I mean BA is that I took DeLong to be saying something like this: “Whether or not you think the gold standard is the right thing to do, the fact is that it is incompatible with modern democratic governments.” I have seen other gold critics (not necessarily DeLong) say this in almost as many words. It seems like an independent argument against gold, to wit: “Not only is the gold standard bad, but it’s impossible politically anyway. So suck it up and learn to love Big Fiat.”
I agree. But, I can stomach DeLong’s argument better than I can of those who say there isn’t enough gold to conduct commerce by using current US dollars as their comparison.
So horrible currency management by the corrupt and incompetent that led to predictable and negative results and ultimately to the theft of billions worth of private property by socialistic goonbags is interpreted as the people rejecting gold as an exchange medium?
Am I getting this correct?
Socialist Gabriel Kolko in “Triumph of Conservatism” demonstrated that the so called “progressive” reforms of the “progressive” era were the work of big business using the government to limit competition. I’m not sure as to what degree “ideology” played a part in that analysis, if any.
http://tinyurl.com/3qacpp9
Light money travels faster than sound money.
I couldn’t help but shake my head and laugh at that one.
Silas,
My argument is that simply breaching a promise is not stealing. This is true as a matter of people’s common sense moral intuitions, and it is true as a legal matter (and has been pretty much throughout all of recorded history). There’s nothing special about gold here, nor it is a matter of the government getting to do things that individuals cannot (note that my Starbucks example involves neither government nor gold).
I should say that it’s not clear to me that a nation going off the gold standard does constitute a breach of promise, anymore than it would be a breach of promise for the government to abolish Social Security after people had paid into the system for decades. But even if it should be considered a breach of promise that doesn’t make it theft; it certainly doesn’t make it equivalent to “extremely well-armed muggers take my gold.”
If federal reserve notes were warehouse receipts for a given amount of gold, then that might be a different matter. But they aren’t warehouse receipts, and the Rothbardian insistence that they are warehouse receipts strikes me as a paradigm case of the desperate a priori in action.
Incidentally, if you want people to do a better job of “engaging the issue” when they talk to you, you might try dialing down the snark factor a bit. Not only does it come across as rude, but it makes it hard to tell what you are really trying to say and what is just sarcasm (for example, when I read your last comment, I had to ask myself “Does Silas think that I am a Rothbardian, or is that some kind of joke I’m just not getting?”)
It seems like we’re just arguing over definitions, and you’re a priori reference is strained and unsubstantiated. Intelligent people recognize that you can accomplish the same thing through breached promises that you can through stealing, and hence stable legal systems tend to allow remedies for both.
I have never tried to argue from definitions here: the same intuitions (and history) that make us judge pickpocketing or mugging as bad, are responsible for us regarding breach of such promises as bad. (As Stephan Kinsella has argued in his expositions on contracts, breach of promise can, under some circumstances be indistinguishable from theft: they are both cases of attemting to transferring ownership without consent.)
You have yet to show a substantive difference between taking money conditional on providing a good + unilaterally repudiating it vs. stealing. All you offer is nitpicking on unhelpful distinctions, and how “weird” it would be to call the cops over an analogous case with respect to a $5 coffee.
Well, I’m sorry you find that “weird”, but for Starbucks to repudiate such a gift card is wrong for much the same reason that theft in general is wrong. If you want to dispute the wrongness of this general class of activity (whatever you call it), you haven’t said anything substantive to that effect.
When you have such an argument, I’m interested in hearing in hearing it. I’m not, however, interested in confused debates over terminology in which you invoke your feeling of weirdness at suing over gift card fraud as if it has some kind of relevance. Thanks.
Peace out.
Silas,
It true that stable legal systems tend to allow remedies for both theft and breach of contract, but they are invariably *different* remedies, which underscores that they are not the same thing.
Do you not recognize the difference between breaching a contract and stealing from someone? Have you never broken a lease? Do you think that people that do break their leases should go to prison?
Blackadder,
If you break a lease and have the money to pay it, the court will (probably, depends where you are) order you to do so. If you refuse the courts order that is a criminal offense.
Obviously if you are bankrupt then the proceedings are different, but by the same token if you refuse to liquidate your assets, or do whatever the court instructs you to do in this case, you are a criminal.
At the end of the day the message is clear: Taking something for someone for a promise, and then not honoring that promise or reversing the state of affairs plus some penalty to the best of your ability, is tantamount to crime. And this is a very reasonable position for legal systems to take.
If you break a lease and have the money to pay it, the court will (probably, depends where you are) order you to do so. If you refuse the courts order that is a criminal offense.
No, that’s not how it works. If your landlord takes you to court he can get a civil judgment which he might be able to use to garnish your wages, ruin your credit, maybe even get a lien put on your property. But it’s still not a criminal offense if you don’t pay. You don’t go to jail just for not paying your bills.
Obviously if you are bankrupt then the proceedings are different
This just highlights the difference between a breach of contract and stealing. If I steal money from someone and spend it before I’m caught so I can’t pay it back, I still go to prison. But if I can’t pay my debts I can file for bankruptcy and legally many of my debts can be reduced or eliminated.
Blackadder,
If you don’t honor the lien i.e. sell the property and keep the proceeds for yourself, or your employer refuses to garnish your wages, these are criminal offences. If a court tells you to do something and you don’t then you are in trouble. And usually when you owe someone money the court orders you in some way to pay them back (you listed two such ways).
I guess if your point is “well sometimes courts will be lenient given the circumstances surrounding debt obligations, and will allow the debtor to weasel his way out of it pretty easily” then you are correct. But the same can be said of direct criminal behavoir too. Sometimes courts are lenient with the circumstances surrounding thievery. E.g. a hungry homeless person taking an orange from the fruit shop is less likely to go to jail than the armed robber.
But I don’t think just because there are varying degrees of taking people’s stuff that you are not taking people’s stuff. I think that even in your hypothetical where governments merely ask for citizens to give their gold in return for promises and then never go good on those promises, the government is still taking stuff away from their citizens. In fact this situation is pretty bad because I think it can be proved that the government asked for the gold with no intention of every paying it back in the first place.
I think someone should take your refrigrigeraor, not let you own a regrigerator ever again, promise to give you your refrigerator back after so many years, and then never do that.
But wait that’s not stealing, it was done in too round about a way to call it stealing.
Also of note: it takes a special kind of person to not see the difference between a starbucks gift card which you choose to buy on your lonesome, and starbucks coming over to your house and replacing all your money with their equivalent in starbucks gift cards! And if you say “I do not need all these gift cards, I prefer my regular money”, off you go to jail!
Also usually when a promise written or implied is not honored there are legal avenues to bring things back to the way they were. For example if my business hires a consultant for $32,000 to do something, and he never shows up and never does anything, then I can probably get my money back.
I think someone should take your refrigrigeraor, not let you own a regrigerator ever again, promise to give you your refrigerator back after so many years, and then never do that.
But wait that’s not stealing, it was done in too round about a way to call it stealing.
Why wouldn’t it be stealing when they actually took it?
Suppose a guy offers to buy and sell refrigerators for $100 a pop. You sell him yours. Later you come back and say “here’s $100 I would like my fridge back.” He says “actually I’ve raised my prices; fridges are $200 now.” Has he stolen your refrigerator?
Also of note: it takes a special kind of person to not see the difference between a starbucks gift card which you choose to buy on your lonesome, and starbucks coming over to your house and replacing all your money with their equivalent in starbucks gift cards!
Are you under the impression that when the government goes off the gold standard in sneaks into people’s houses and replaces all their currency with new notes? If not, then while I do see the difference between the two cases, I fail to see the relevance of the example.
Also usually when a promise written or implied is not honored there are legal avenues to bring things back to the way they were.
True, but they wouldn’t be criminal penalties.
“Are you under the impression that when the government goes off the gold standard in sneaks into people’s houses and replaces all their currency with new notes? If not, then while I do see the difference between the two cases, I fail to see the relevance of the example.”
When the word confiscation is used and I think realistically how this might have been carried out I think of not so much someone sneaking into your house, but someone sending you a letter asking you to turn over all your gold, and saying that any gold that you held at your bank is now irredeemable in anything but promises (and that is the sting). Furthermore I imagine some policeman coming around and asking for your gold, warning you of the consequences of lying, but not really searching through your posessions to check if you are. Except in the odd occasion of the evil policeman that no one likes who searches your house and takes any gold you don’t give over for himself.
Avram,
I think you misunderstand me. In my examples, physical gold confiscation is analogized to getting mugged, etc. I certainly wasn’t defending or minimizing *that.*
Ah ok, I thought we were talking about the way gold was confiscated in the U.S. and that you were saying that wasn’t so bad because you got dollars in return. I see now that you were saying “if people were to decide that they would trade their gold for gold certificates in response to the government now taking only those as legal tender for tax purposes, then it would not be a crime for the government to never make good on the gold certificates.” which I disagree with too, but you’re right that some of the stuff I said was definitely pointed to the way it was actually historically done, and not this hypothetical ‘better’ way to do it.
Apologies.
“Incidentally, if you want people to do a better job of “engaging the issue” when they talk to you, you might try dialing down the snark factor a bit. Not only does it come across as rude, but it makes it hard to tell what you are really trying to say and what is just sarcasm (for example, when I read your last comment, I had to ask myself “Does Silas think that I am a Rothbardian, or is that some kind of joke I’m just not getting?”)”
Incidentally, you could stop being so mean. Your entire debating tactic seems to be “I’m going to ignore the obvious until the guy I’m talking to gets angry enough to point it out in an angry tone, and then I am going to point to him and say uncivilized! Barbarian! I am a civilized academic! Journals! Oh and it doesn’t matter that he was right all along, I successfully made him sound stupid when he said it so no one will listen to him” I think thats a really underhand thing to do, and an appauling way to lead a conversation.
Thanks, Avram. I’m glad I’m not the only one who noticed.
Most academics and socialists of all stripes simply hate gold on an emotional level because they hate the idea of laissez-faire and the true individual rights such a system implies. Breaking down their arguments is giving them too much credit.
BA wrote:
My argument is that simply breaching a promise is not stealing. This is true as a matter of people’s common sense moral intuitions, and it is true as a legal matter (and has been pretty much throughout all of recorded history).
Whoa, is this true? I’m not being sarcastic. If I tell someone I’ll sell him my car for $1,000, he hands me the $1,000, and I drive off, the most he can do is sue me? That’s not theft?
And as far as the word “confiscation”: I agree it sounds unnatural in the Starbucks example, BA, but try this one: I go into a restaurant and check my coat. They give me a ticket. After the meal, I go to claim my coat, and they say, “Due to a change in clothing policy we are no longer honoring the convertibility of our tickets. We are going off the coat standard.”
I run back to the table and tell my party, “They just confiscated my coat!!”
I think that sounds fine, don’t you?
LOL @ “going off the coat standard” — well said!
Whoa, is this true? I’m not being sarcastic. If I tell someone I’ll sell him my car for $1,000, he hands me the $1,000, and I drive off, the most he can do is sue me? That’s not theft?
In that case you could call the cops. But you won’t go to jail if you stop making your car payments.
And as far as the word “confiscation”: I agree it sounds unnatural in the Starbucks example, BA, but try this one: I go into a restaurant and check my coat. They give me a ticket. After the meal, I go to claim my coat, and they say, “Due to a change in clothing policy we are no longer honoring the convertibility of our tickets. We are going off the coat standard.”
I run back to the table and tell my party, “They just confiscated my coat!!”
Right. This is why I said it might be a different story if federal reserve notes were warehouse receipts. In the coat example the issue isn’t really convertibility. If you gave them your ticket at the end of the meal and they gave you someone else’s coat you would still have grounds to complain, whereas if you sell gold to the government and then later buy back an equal amount you can’t complain that they didn’t give you back the same exact bars.
Blackadder: this is the part where most people just concede the point.
Does this not look like a warehouse receipt?
(Sorry for the numerous short posts, Bob.)
Does this not look like a warehouse receipt?
No. This is what a warehouse receipt looks like.
And this what inability to identify relevant similarities looks like.
I think it’s more important to note the relevant differences.
A relevant difference would be, “One of these pledges to redeem the note for a set quantity of a good, while the other does not.”
Anything else (i.e., every difference you’ve brought up so far) is fluff.
“Why, let me reck’n fur a minnit. I don’t think that thur sharrif’s gunna takeya t’ th’ county jail if yur fancy coffe place won’t take yur gift certiffykit, so I done reck’n there ain’t nothin wrong with’t.”
A relevant difference would be, “One of these pledges to redeem the note for a set quantity of a good, while the other does not.”
See, that wasn’t so hard.
For whom? If you didn’t realize that from the beginning, you operate too slowly to be worth my time.
Argh, it occurred to me that my replies might still have gone over Blackadder’s head.
The difference I described *would* be a relevant difference if it were *true*. It is not. Ergo, there are no relevant differences between the two warehouse receipts, and your attempts to argue that there are come across as desperate and nit-picking.
The government. Dishonered. Warehouse. Receipts. Get it? There is no relevant difference between that and Bob’s example of “going off the coat standard”.
I’m sorry you lack the abstract thought capability necessary to see how it’s stealing when someone takes your car conditional on giving you $X and they drive off without ever paying. That’s a shame, and I wish you got proper nutition as an infant so people wouldn’t have to explain this stuff to you when you grow up.
To any reasonable extent, I’ll be glad ot assist you in cognitive solutions that that make you no longer need to have these things explained to you. But it needs to start with an admission of error on your part. Think you can swing it?
Indeed, there is no difference with Bob’s example of getting off the coats standard.
Bob gets just a ticket with a number which gives him the right to later claim whatever is in the hanger, which could be his coat, someone else’s coat, or nothing at all.
He gets no warehouse certificate explicitly stating what he will get back.
Okay, so as usual Silas is being an insufferable jerk. However, in case anyone else is still reading this, I would point out that the gold certificate he links to does not, in fact, pledge to redeem the note for a set quantity of a good.
Here, for example, is an image of the silver-backed private currency the Liberty Dollar. You’ll note that, unlike the gold certificate Silas linked to, the Liberty note doesn’t just say that it can be redeemed for ten Liberty dollars worth of silver. It specifies an exact weight and grade of silver, which it warrants is sitting in a warehouse somewhere insured against fire, etc. *That* is was a currency trying to double as a warehouse receipt looks like.
No, it’s not a warehouse receipt. Blackadder is obviously right.
The only obligation of the government is to accept the bill in payment of taxes for the amount of fifty dollars in gold coins.
I don’t think it ever defaulted on that obligation.
Mammoth wrote:
I don’t think it ever defaulted on that obligation.
No, the government had promised to turn over gold in exchange for $20.67 in currency (plus handling fees). That’s what it meant to be on a gold standard. See here.
Also Mammoth, look at the gold certificate picture Silas linked above.
Bob,
Suppose the government cuts Social Security payments. Do you think that is stealing from all the people it promised would receive benefits at the old level?
Hmm good question. I think it would be, if the government had resources of its own and just reneged on the payment. But it’s tricky since the only way to “honor” the promise going forward is to (in my opinion) steal it from younger workers.
If you then come back and say, “Well aren’t they stealing from taxpayers if they honor the gold peg?” I think it’s not quite the same thing, since in theory they have a bunch of gold dedicated to that very purpose. So if they had corporate stock in the SSTF instead of Treasurys, I would probably favor that they liquidate the corporate stock and then distribute the proceeds to the Social Security beneficiaries as best they could, rather than just cutting payments down to $0.
But clearly, somewhere along the line theft was involved. I’m just not sure exactly where to put it.
What this article says is just that the government fixed the price of the currency at $20.67 per ounce.
The government as the monopolist issuer of its own IOUs sets its price one way or the other, and one way is to fix its price to gold and let the quantity adjust.
A. Mitchell Innes in 1913:
But the laws of legal tender which most countries have adopted, have produced indirect consequences which were not originally foreseen or intended. The purpose of such laws was not to make gold or silver a standard of payment but merely to require that creditors should not refuse payment of their credit in coins issued by the government at the value officially put upon them, no matter of what metal they were made; and the reason for these laws was not at all to provide a legal means of paying a debt, but to keep up the value of the coins, which, as I have explained, were liable to constant fluctuation either by reason of the governments issuing them at one value and accepting them at another, or by reason of the insolvency of the government sowing to their excessive indebtedness.
We may leave to lawyers the discussion of what may be the legal effect of such laws; the practical effect in the mind of the public is all that concerns us. It is but natural that in countries in which, like England and America, the standard coin is a certain weight of gold, a law providing that creditors shall accept these coins or the equivalent notes in full satisfaction of their debts, and mentioning no other method of settling a debt, should breed in the public mind the idea that that is the only legal way of settling a debt and that, therefore, the creditor is entitled to demand gold coins.