Potpourri
==> Lessons for the Young Economist is now poised to infiltrate China.
==> I am quoted in this article about Bitcoin, saying something noncommittal.
==> Tom Woods announces the Ron Paul Homeschool Curriculum.
==> I talk to Scott Horton about the Fed and U.S. wars.
==> A funny rant about the “I f**king love science!” page. Bad words, obviously. (HT2 Daniel Kuehn)
==> The two cranky guys from the Muppets, now on YouTube and talking about economic issues.
==> I get Zwolinski’s general point, but if you have to say, “After all, who doesn’t think it’s wrong to steal someone else’s property, to club some innocent person over the head, or to force others to labor for one’s own private benefit?” you know you’re in dangerous waters. (I.e. Zwolinski is going to show us all the times it *is* OK to steal someone else’s property, club an innocent person over the head, and force others to labor for one’s own private benefit.)
==> Russ Roberts has some great points in his debate on the minimum wage.
==> Is there a definitive account of what happened with Wesley Snipes? Like, was he just rolling the dice, or was he not paying his taxes for ideological reasons? And, did he effectively trade a few years of his life for several million dollars, or did they get the money anyway?
==> Jacob Levy gives an interesting critique of Landsburg’s (I think unintentionally) provocative post. Here’s Levy:
“I experience discomfort at knowing that you are doing something I don’t approve of” is not basic building block of how humans express morality to each other. ”I disapprove of what you are doing because…” is the normal way to begin– and it doesn’t count as a successful end to the sentence to say “… because it causes me psychic discomfort to think about your doing that.” The attempt to build Rube Goldberg machines that approximate basic moral judgments using only the utilitarian building blocks of pleasure and pain is sometimes successful, but even when it is, it looks like (as Bernard Williams put it) thinking one thought too many. The reason for moral disapproval is primary; running it through the fact that other people experience psychic discomfort at the activity is, at best, taking the long way around, and, normally, a misunderstanding of what’s at stake. Human actors have, and offer, reasons for their moral reactions, and don’t treat the mere fact that they have the reactions as substitutes for those reasons.
Sort of akin to my Captain Obvious post about the Hoover/Mellon record, I suppose I must respond to David Friedman who seems genuinely baffled that Landsburg’s post upset people. OK: People really were saying after the conviction that “c’mon, that wasn’t ‘rape rape'” and of course CNN did all kinds of crazy coverage about the poor plight of the convicted rapists. So in that context, Landsburg writing a post containing the sentence, “As long as I’m safely unconsious and therefore shielded from the costs of an assault, why shouldn’t the rest of the world (or more specifically my attackers) be allowed to reap the benefits?” was not conducive to awards from Oprah.
Let’s be clear: Steve wasn’t suggesting we legalize rape, or that what happened to the girl in that case was no big deal. I’m not here implying that Steve should be fired. What I am saying is that Friedman’s reaction, saying people upset at Steve are either “stupid or evil,” is crazy too. It is obvious that that post would make people flip out, like I said when it first appeared.
==> Phew! A return to normalcy. Steve Landsburg talking about price discrimination. (“What?! He’s for discrimination?! He thinks the elderly should pay different prices!!”)
I can’t begin tell you how disappointed I was when I clicked on that link and did not get Statler and Waldorf discussing economics.
Geez, and you guys complain about fractional reserve banking as fraudulent!
Yikes! I feel genuinely bad. That would be cool, wouldn’t it?
Now I know guile!
Not only that, but he misses the whole problem of the banking crisis in Cyprus: the absurdity of using foreign currency (Euro) for a domestic banking system and then not having your own central bank to guarantee that system.
I was too distraught to actually listen to the thing
“the absurdity of using foreign currency (Euro) for a domestic banking system and then not having your own central bank to guarantee that system.”
the absurdity of using foreign currency (federal reserve notes) for a state level domestic banking system and then not having your own state level central bank to guarantee that system.
the absurdity of using foreign currency (state level notes) for a county level domestic banking system and then not having your own county level central bank to guarantee that system.
the absurdity of using foreign currency (county level notes) for a domestic city banking system and then not having your own city central bank to guarantee that system.
the absurdity of using foreign currency (city level notes) for a domestic neigborhood banking system and then not having your own neighborhood central bank to guarantee that system.
the absurdity of using foreign currency (neighborhood level notes) for a domestic household banking system and then not having your own household central bank to guarantee that system.
the absurdity of using foreign currency (household level notes) for a domestic individual banking system and then not having your own individual central bank to guarantee that system.
The logical endpoint of your “it’s absurd!” argument, would call for money production and issuance at the individual level.
Today is the day that LK became individualist-libertarian in money.
No more national central banks (since it is “absurd” for states to use foreign national currency), no state level central banks (since it would be “absurd” for counties to use foreign state level currency), no county level central banks (since it would be “absurd” for cities to use foreign county level currency), etc, etc.
Oh what am I saying. This all would imply LK is a consistent, non-contradictory thinker. Silly me.
Came here via pingback from the price discrimination post.
I don’t think Landsburg understands how air ticket pricing works…. he makes an economic argument based on silly assumptions. Yes, it’s a return to normalcy.
while you’re at this landsburg-friedman-morality thing, maybe you could share some thoughts on gary norths involvement in the rp carriculum.some people with significant facebook following (+16k) seem to have a problem with his cred as a liberty advocate because of his sinai strategy etc. in the comments it seems that people are rather upset. see>http://blog.skepticallibertarian.com/2013/04/08/gary-north-the-libertarian-taliban/
The best page in the universe is still around?! I had no idea. It’s like I’ve reconnected with an old friend.
The rant is really funny!
I was already somewhat confused to see so many people trying hard to look like nerds, but in very stylish way…
That is the awesomest page ever! And completely true as well.
This is quite funny (and sad at the same time) too:
“Petition For Inclusion In The Fed’s Early Distribution Newsletter”
http://www.zerohedge.com/news/2013-04-10/petition-inclusion-feds-early-distribution-newsletter
Re Hoover and Mellon, this is probably about as close as DeLong ever gets to issuing a retraction.
interesting
DeLong citing “Lord Keynes”. Sounds fair to me.
As Hoover said in his acceptance speech for the 1932 Presidential renomination:
[W]e might have done nothing. That would have been utter ruin. Instead, we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action.
As Rothbard said: “No one could accuse him of being slack in inaugurating the vast interventionist program”:
No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times. . . . For the first time in the history of depression, dividends, profits, and the cost of living have been reduced before wages have suffered.
No, Hoover’s policies were not officially “Keynesian” because it did not seek to plug the non-existent “gap” and he raised taxes like crazy in 1932. But he was not “liquidationist” and he was not “laissez faire” and his regime does not demonstrate the failure of either.
Further, because no Keynesian in the galaxy understands the basic Austrian concepts, no Keynesian in the galaxy has ever calmly and fairly set forth the Austrian analysis of government-induced price distortions and found it lacking (as long as we are discussing “intellectual honesty”).
Bob,
Notice the slippery qualifier used to characterize liquidationism in that DeLong post quoting LK. Unless I’m missing something in those quotes, Hoover (or Mellon or anyone else for that matter) never explicitly stated they endorsed/rejected “hard” liquidationism as if to distinguish it from some kind of softer liquidationism (whatever that might mean). That was LK’s quote where he goes on to assert: “So Hoover’s rejection of Mellon’s extreme liquidationism was very limited indeed in its aims,…”
So, now LK or DeLong can come in and say: “Well, Hoover may not have endorsed or carried out “hard” or “extreme” liquidationism from that extremist Mellon, but he didn’t stimulate the economy anywhere near to our liking, and by his own words, Hoover merely wanted to soften the downturn; therefore, he was still a liquidationist.”
If LK and DeLong are making the Hoover = liquidationist claim (not to be confused with “hard” or “extreme” liquidationist), it would help if they could define what liquidationist policy means in their world.
Mellon thought that nothing whatsoever should be done.
Hoover’s rejection of Mellon was mainly limited to interventions for “cushioning” or ameliorating the suffering or worst aspects of the depression.
By 1932 he was quite clear of the “urgent need of the country for prompt passage of the emergency legislation and balancing of the budget” through tax increases. On 5 May 1932 he wrote a message to Congress “devoted solely to the necessity for balancing the budget as the next item on the recovery program”.
Hoover:
“Nothing is more necessary at this time than balancing the budget. Nothing will put more heart into the country than prompt and courageous and united action. …
The details and requirements of the situation are now well known to the Congress and plainly require:
1. The prompt enactment of a revenue bill [i.e., tax increases]. …
2. A drastic program of economy [i.e., austerity] which, including the savings already made in the Executive budget of $369,000,000, can be increased to exceed $700,000,000 per annum.”
That policy aim and action in the depth of depression is exactly a lesser form of liquidationism.
LK –
“Mellon thought that nothing whatsoever should be done.”
>> Right, so “do nothing” = liquidationism.
“Hoover’s rejection of Mellon was mainly limited to interventions for “cushioning” or ameliorating the suffering or worst aspects of the depression.”
>> You’re basing this on Hoover’s words, rather than actual policy, by citing those Hoover quotes. Ok, but let’s take a look at some other words uttered by Hoover during the ’32 campaign:
“…we might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action. . . . No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times. . . . For the first time in the history of depression, dividends, profits, and the cost of living, have been reduced before wages have suffered. . . . They were maintained until the cost of living had decreased and the profits had practically vanished. They are now the highest real wages in the world.
Creating new jobs and giving to the whole system a new breath of life; nothing has ever been devised in our history which has done more for . . . “the common run of men and women.” Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom. . . . We determined that we would not follow the advice of the bitter-end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction
We developed cooperation between the federal, state, and municipal governments to increase public works. We persuaded employers to “divide” time among their employees so that as many as possible would have some incomes. We organized the industries to undertake renovation, repair, and, where possible, expand construction”
(bold added)
And did FDR critize Hoover for his liquidationist policy (or lessor form of liquidationism) during the same presidential campaign? Not exactly.
He blasted Hoover for his “reckless and extravagant” spending, presiding over “the greatest spending administration in peacetime in all of history,” while his running mate accused the Hoover administration for “leading the country down the path of socialism.”
I’m not sure how anyone can possibly make the case that Hoover didn’t intervene in the economy. If you want to say Hoover did the wrong things or even make the case that he didn’t do enough… fine, make that case. But to suggest he was a liquidationist (ie “do nothing”), or even qualifying it as some lesser form (whatever that means), is absurd.
Anyone who fails to fill the “output gap” with government spending is heading for failure and “liquidation” and should be called an “austerian”.
Heads I win, tails you lose.
“We determined that we would not follow the advice of the bitter-end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction”
Exactly as Hoover said elsewhere — but this quote does not support your case PRECISELY because it presupposes that Hoover WAS prepared to allow a very significant degree of bankruptcy and liquidation.
“I’m not sure how anyone can possibly make the case that Hoover didn’t intervene in the economy. “
That is nothing but a ridiculous straw man.
I have already conceded he intervened to cushion and lessen suffering, but as he himself said:
“I refused national plans to put the government into business in competition with its citizens. That was born of Karl Marx. I vetoed the idea of recovery through stupendous spending to prime the pump. That was born of a British professor. I threw out attempts to centralize relief in Washington for politics and social experimentation.”
You’ve also ignored his clear and resolute idea that balancing the budget WAS the main policy for recovery.
So vetoing anyone who wants more stimulus makes one an austerian?
LK –
“Exactly as Hoover said elsewhere — but this quote does not support your case PRECISELY because it presupposes that Hoover WAS prepared to allow a very significant degree of bankruptcy and liquidation.”
>> What?! How in the world do you conclude from that quote that liquidation was what Hoover was “prepared” to do as opposed to what one of his advisors merely suggested?
““I’m not sure how anyone can possibly make the case that Hoover didn’t intervene in the economy. “
That is nothing but a ridiculous straw man.”
>> No it’s not. Because intervening in the economy, by definition, is not following through with a liquidationist policy.
“You’ve also ignored his clear and resolute idea that balancing the budget WAS the main policy for recovery.”
>> So now liquidationism (or some lessor form) = balancing the budget. Ok, gotcha.
Do you see the problem here? What is your definition of liquidationism?
“No it’s not. Because intervening in the economy, by definition, is not following through with a liquidationist policy.”
Fine. You want to define “liquidationism” SOLELY as:
(1) a policy where the government strictly does nothing AT ALL during a recession or depression?
Your definition is already incoherent.
Suppose there was a depression and the government intervenes but only to CUT spending and rapidly balance the budget.
Is this liquidationism or not?
According to the definition (1) above, it is not.
Yet “cutting spending and rapidly balancing the budget” is precisely what Austrians would want during a recession and would be part of your own liquidationist policy.
You just define what you mean by “liquidationism” clearly and coherently before you go accusing other people of not using language properly.
We would advise balancing the budget by liquidating the government.
Balancing the budget by taxing is not austerity where we intend it to happen.
And “cut spending” does not mean “close loopholes”.
I’m not an anarchist, so I have a different definition of government doing nothing at all; which is: Government ceasing the attempt to affect the economy.
They should stick to protecting private property rights, in my view.
And they should still not try to affect the economy when the free market repairs the damage done by government interventions.
“I’m not an anarchist, so I have a different definition of government doing nothing at all; which is: Government ceasing the attempt to affect the economy.”
As I just said, your definition is already incoherent.
If during a depression, tax revenue falls, do you advocate that the government immediately cutting its own spending to match tax receipts?
Yes or no??
If yes, by definition you cannot define liquidationism in the way you did, because its action will always “affect the economy” in some way (even if it is according to you a *positive* way!)
If no, then what?? You advocate a deficit?
“We would advise balancing the budget by liquidating the government.”
This contradicts your claim be a minimal state Austrian.
“Suppose there was a depression and the government intervenes but only to CUT spending and rapidly balance the budget.”
Is this liquidationism or not?
According to the definition (1) above, it is not.
>> First, how is a government intervening by cutting spending? Second, any government intervention (ie increased spending, setting wage/price controls, raising tariffs, passing new regulations, etc) that hampers the free market process of repricing assets by voluntary market actors or otherwise mitigates the effects of private losses (ie bailouts, subsidies, govt loan guarantees, etc) can not be considered liquidationist. Third, and I’m not speaking for Austrians here, but what does a balanced budget have to do with anything? In other words, in a $10trillion economy, would it be considered less interventionist running a balanced budget of $5trillion -or- running a small deficit on a budget of $1trillion? I’d say the latter despite running a deficit because the government is spending less on a nominal basis and as a percentage of the whole economy. Either way, I don’t see how Austrians seek balanced budgets as a policy objective, they seem to simply want less overall federal spending and taxes, period. How that balances or not is of secondary importance.
“If yes, by definition you cannot define liquidationism in the way you did, because its action will always “affect the economy” in some way …”
Everything “affects the economy” in some way – that’s not what I was saying.
I mean that the government should not pursue a particular economic state.
It should only protect individual property rights.
““We would advise balancing the budget by liquidating the government.”
This contradicts your claim be a minimal state Austrian.”
Government is a tool; It’s not, strictly speaking, necessary.
If no one came to the defense of someone’s property, people would still have the right to attempt to defend their own property.
Maybe it will help to say that I see arbitration as still government (Anarchists would disagree, of course).
At any rate, though, since crashes are liquidations of malinvestments caused by government interventions, a return to the level of spending justified by only those functions which are consistent with respect for individual liberty would be sufficient to return the economy to sustainable growth.
“… I don’t see how Austrians seek balanced budgets as a policy objective, they seem to simply want less overall federal spending and taxes, period. How that balances or not is of secondary importance.”
We want the government to fulfill the obligations we gave it with the amount of money we were willing to fund it with. If it can’t fulfill those obligations on the budget we gave it, it does not have the authority to acquire the funds in some other way.
Any deficiencies in government caused by a lack of funding is the People’s duty to rectify, not the government’s.
(And no Constitutional amendment can justify giving authority to violate the will of the individual. If another individual is not permitted to do something to someone, then neither is the government.)
So, basically, this post means you are nothing but a liar, right? I mean you know the truth, right? You are purporting to be someone who knows enough to actually debate about these issues? But then you post this to assert Hoover liquidationism was a fact.
The public has long been misled by “‘progressives” claiming that laissez faire both caused the depression and was then employed by Hoover as his total failed response to the depression. Both claims are lies with malice aforethought.
We should be telling the public that Hoover had a vast regime of interventionism although he did not buy into the Keynesians’ absurd concept of an “output gap”. That’s actually the gist of the Keynesian critique of Hoover no matter what you call it. I say let the Keynesians explain that nonsense to the public. The public won’t buy Keynesianism if it is explicitly and fairly explained and not couched in their typically incomprehensible jargon and BS.
http://bobroddis.blogspot.com/2012/08/as-ive-said-for-forty-years-people-do.html
I did Murphy’s course on The Great Depression and the course teaches exactly what you suggest.
I also read Rothbard’s book on The Great Depression which also documents Hoover’s interventions (in fine detail, with names, dates and close relations).
The problem is getting people to listen.
Since official Keynesianism was not tried and the Austrian solution was not tried in the Great Depression, perhaps we should stop employing the historical anecdotal method to determine economic principles.
Since the Great Depression occurred, the government’s policies were therefore “Austrian..ish”.
No gold standard during the 19th century, but gold is to blame for the business cycles.
It goes on and on…
Hey where’s Silas Barta?
I’m curious about his Bitcoin mining experiment.
http://blog.tyrannyofthemouse.com/2011/06/explaining-not-setting-bitcoin-straight.html
http://consultingbyrpm.com/blog/2011/06/bitcoin-crash-in-real-time.html
http://consultingbyrpm.com/blog/2011/06/silas-barta-gives-a-bit-of-an-explanation.html
I hate to be a Debbie Downer, but EPJ makes a disturbing point (from my perspective, not EPJ’s) about the Ron Paul Homeschool Curriculum:
Anti-IP Crushed: EPJ’s Steve Kinsella IP Debate Page
http://www.economicpolicyjournal.com/2013/04/anti-ip-crushed-epjs-steve-kinsella-ip.html
And since EPJ and Ron Paul both believe that the UN is a legitimate arbiter for Copyright disputes on the Internet, then it means that they will hand you over to the UN to protect their non-right to tell others what they may do with the information in their own mind.
And by the way, Wenzel likes to use some arguments from Rothbard to support his pro-IP position …:
Intellectual Property: As usual, Rothbard gets it right
http://www.economicpolicyjournal.com/2013/04/intellectual-property-as-usual-rothbard.html
(This article was not written by Wenzel, but this argument came up in the debate.)
… But as Kinsella was trying to explain, Rothbard was using a qualified definition of the term “Copyright” that was not as clear as it could have been; Consider these words from Rothbard from before and after the section that Wenzel quotes:
The Ethics of Liberty by Murray N. Rothbard
16. KNOWLEDGE, TRUE AND FALSE
http://mises.org/rothbard/ethics/sixteen.asp
These are obviously anti-IP statements in the sense that the term IP is normally understood – and in the same chapter!
So, a charitable reading, on my part (not having read this or the other Rothbard books to which Wenzel has referred), would be to suppose that Rothbard was simply arguing for the legitimacy of contracts which restrict the dissemination of information by those bound by contracts.
(An uncharitable reading would be that Rothbard had a brain fart in Chapter 16.)
Wenzel quoted from other places where Rothbard supported “copyrights” and “patents”, which maybe was another case in which he used qualified definitions. But he did quote from Rothbard in another place where he really did seem to support the idea that a third party who was not under contract, but was in some way given access to works by someone who WAS contractually obligated to withhold it, could be prosecuted for copyright infringement.
As Kinsella noted, though, even if Rothbard believed how Wenzel thinks he believed, Rothbard would be wrong. It is inconsistent with self-ownership that someone who has not agreed to a contract must refrain from disseminating information in his own head.
And finally, the “Drudge Formula” can be used by Wenzel indefinitely – it is not scarce. Wenzel’s SERVICE of providing access to the information in his head is what is scarce.
I actually take a pro-IP position from a Copyright perspective, but I believe that the Bourne Convention got it right and 50 years is quite sufficient time for a Copyright to last.
The natural right would be that people can copy what they have access to (because doing so does not entail violence) so we can agree that Copyright is certainly an unnatural property right. However, it also balances private profits against eventual public good (when the Copyright expires). The problem is that vested interests captured the system and started gaining more rights than was appropriate given the balance of it all.
I also support GPL and other “Copyleft” licenses which prove that people can choose to cooperate in certain situations, when it is in their mutual interest to do so. These of course depend on Copyright law as their foundation.
I’m pretty sure there is no such thing as common law copyright. It started in England from Queen Anne, and in the US the principle at least goes to the US Constitution. If someone can point an example of such a thing then I might agree with Rothbard, but maybe he is referring to something that is generally not known as “copyright”.
It does sound like he is talking about an NDA or something similar.
Copyright is statute law. Chaucer could not copyright his tales.
Is there a rule of thumb for how far below “filling the gap” government spending must be to be called “austerian” or “liquidationist”? 5%, 10% 25%, 50%, 75%, 90%???? This is obviously just for definitional purposes because there is no “gap” or “trend line”, government spending doesn’t fill it, and subsequent government spending is not the same thing as the accumulated sales prices taken from the pre-bust credit binge.
Further, why would anyone want to attempt to replicate the pre-bust credit binge that leads to private debt-deflation?
According to LK and the Steve Keensians, the reason there was a boom after WWII was because there was little private debt. After a 15 year funny money and government spending induced depression, the statute of limitations would have run on most debts after 5 or 6 years. Drag out the depression long enough, and you will ultimately get the dreaded liquidation.
I have a question about the regression theorem.
There is a controversy about bitcoin and Mises regression theorem. people say that Bitcoin violates Mises regression theorem because bitcoin isn’t something of direct use before it becomes a money. Is this really what Mises meant? or did he mean that the idea of “money” could never have occured to people in the first place (developed on the market), if it wasn’t already a otherwise useful good in the first place? Now that we know about money and how it might be a useful thing, we could make up a new kind of money, but we can do this because we already have discovered/invented money.
First principles, Clarice:
The purpose of trade is to lower the costs of acquiring something, in that we are foregoing the production of that thing, ourselves.
The purpose of money is to solve the problem that arises where Person A wants what Person B has, and B is willing to trade, but not for what A has.
But if the money does not represent utility, then there’s no way to know how much of it you should sell your goods for in order to sell profitably (see “the purpose of trade”, above).
Only commodities can be used to store such value (or “utility”), which is why only commodities can be used as money.
(Anything can be traded for anything, but the purpose of money is not to trade just so you can say you traded something.)
Bitcoins could possibly be used as an accounting unit, if someone knew what the thing was that they were accounting for. But money is more than a unit of account.
Oops, forgot to add that the REASON only commodities can store such value is because they already have utility to someone.
You have snuck in an extra step. Where did a store of value become necessary? It is certainly nice if money can store value but if the real purpose of money is to facilitate trade and nothing else beyond that, then store of value is not strictly a necessary requirement.
People after all do continue to use money even with quite high inflation, knowing perfectly well that they have to spend it quick.
Bitcoin of course may or may not store value. The future of bitcoin is highly speculative. However, without a doubt it certainly facilitates trade right now which is what matters for people buying the sorts of things that bitcoin can buy.
“Store” in the sense of “contain”, at the very least – which is true, even if you intend to spend it right away. The utility I wanted in exchange for what I sold has to be represented in the money.
If the money retains the ratio between what I sell and buy, then it makes sense to use it as a store of value in the sense of preservation, as well.
Anything will facilitate trade, if people are gullible enough.
For example, people can just decide to trade for dirt or air if they really wanted to, but it wouldn’t suffice as a medium of exchange (key word being “medium”).
Since the goal of trading is to increase utility, only something which has utility can be a medium between two other things which have utility – that’s just logical.
A unit of account can COUNT things with utility, but it can’t, by that property alone, represent the ratio of utility between one good and another.
Not at all, a simpler barter transaction still increases utility, but the only “medium” required is a handshake.
In effect, all trade can be reduced down to barter transactions if you try hard enough, but having money just makes the process easier. It is nothing more than an intermediate calculation step, but yet the fact that it facilitates trade (i.e. makes the barter process easier) is indeed a thing of value.
The problem only happens when someone tries to rip off the system by printing his own money. With paper money, in theory we have laws to control that, but governments tend to ignore their own laws when convenient. With bitcoin, the participants are trusting the system as a whole, they are not trusting the individuals within the system. The algorithm controls it so that printing more money is sufficiently difficult to make cheating not viable.
Think of it this way, why would anyone in the world have a credit card, when they could have cash? After all, CC transactions generally cost a bit extra, and the card has fees, etc. However, with a CC you can buy something over the phone, or at an online store, with cash you can’t do that. Even though the CC is actually a worse store of value than cash it is also a better facilitator of trade.
Or another question, why did anyone deposit gold for specie in the first place? Why not just exchange gold bars?
You don’t need a handshake or a medium (a handshake is not a medium) to trade something on the spot.
At any rate, I think there is a misunderstanding about what is meant by a “medium”.
If I want something, but someone doesn’t want what I’m willing to give up for it, each party’s subjective valuation can be represented THROUGH something they each value less than what they will buy, but more than what they will sell, such that, in keeping with the purpose of trade, they will both profit.
My subjective valuation of what I want to get is what needs a medium; That’s what needs to be expressed THROUGH the medium that is money, in order for me to gain the kind and amount of utility I want, given the kind and amount I am willing to give up for it.
“The process” of trade – which involves gaining utility by lowering the costs of trade – is not made easier by arbitrarily choosing objects as intermediary steps.
That reasoning is where the boom/bust cycle comes from. If it was enough that people just decided to trade their goods for X amount of dollars, then it wouldn’t matter how much of it people printed.
And if you said that printing money leads to price inflation, resulting in you having to work harder, then what you’re doing is actually proving my point that there IS supposed to be a connection between money and utility.
This connection is absent in the use of anything but commodities.
Regarding credit cards, they are not mediums of exchange, but rather an identification of authority over the Fed notes in a bank account.
The credit card allows you to exchange those Fed notes, which are not money, but an inflated substitute for gold (but not even that, any more).
Gold would be the specie, but I think you meant paper.
Well, you need a receipt if you’re going to deposit gold with the bank. The problem of fractional reserve lending is enabled when the bank turns the receipts into negotiable notes.
They should remain receipts.
Also, there’s this:
FDR Pulled a Cyprus on the American People 80 Years Ago This Week
http://www.economicpolicyjournal.com/2013/04/fdr-pulled-cyprus-on-american-people-80.html
No, it requires fairly particular objects as intermediary steps. One of the properties required is fine divisibility — boitcoin does that, and better than gold. Another is portability — bitcoin does that much better than gold. You can’t put a gold bar into an email. You just can’t.
Another property is that it cannot be arbitrarily copied, and bitcoin carefully manages that by regulating the process of new mining… maybe better than gold, but at least equivalent. Actually, in this aspect the bitcoin algorithm was designed to copy gold’s behaviour.
Yet another property is ease of assay, and bitcoin beats gold there too.
Finally, store of value is nice, but bitcoin is OK as a short term store of value, and I’m willing to say probably not my best choice as a long term store of value, but gold is not perfect in that aspect either (people can steal it from you).
This does not explain why people voluntarily use credit cards, even when they know it costs them more than cash. For example, people who have debit cards generally pay a fee for that… but what they are paying for is access to a very large international transaction clearance network. You can take your VISA card and have a bank account in Australia but withdraw a handful of local cash from ATM’s throughout Europe, Asia and the US. That’s pretty dang convenient don’t you think?
Convenience has a value, no?
Yes, I meant paper receipts. Why would anyone deposit their gold to get a paper receipt? I’ll tell you why, convenience, that’s why. Valuable convenience.
Oops, I made a mistake on the last part, here: “but more than what they will sell”.
There are additional costs to trading when we can’t do it directly, so the value I get in return for “that which I sell and the cost of acquiring and transporting the medium of exchange, combined” would have to result in profit.
This is only necessary if there needs to be some connection to utility.
But that’s my point.
Besides, bitcoins are arbitrarily limited. Someone can create more digital currencies with arbitrarily more or less, ad nauseum.
What value is it storing, if only in the short term?
What does it mean? Why does it mean that?
If the unit of account isn’t accounting for something specific, then it can’t be a store of value.
Are you, for example, just declaring that your 10 bitcoins are worth a loaf of bread?
Then you should be able to trade two loaves of bread, in your area, for something in your area that you would be able to acquire for 20 bitcoins anywhere, assuming someone in your area was willing to accept bread for what you want.
If not, then there’s no connection to utility; Your decision to value 10 bitcoins at a loaf of bread is arbitrary.
What would be the basis for valuing anything at more than one bitcoin? or less than 21 million?
If you say that there needs to be a way of valuing one thing more, or less, than another, then you’re acknowledging that there needs to be a connection to utility.
It wasn’t meant to explain that.
The service of transferring money from one account to another is what is being paid for. Credit cards don’t turn cash into digital information – the information ACCOUNTS FOR the cash.
Not that it matters, since there is barely any connection left between fiat money and gold.
Not as convenient as handing someone physical gold, which would tend to be accepted everywhere (provided government didn’t interfere).
Also, the costs to the taxpayers of funding the operation of a central bank include being burdened by the government to pay back the bonds that were bought by printed money, as well as being bumped into a higher tax bracket through inflation.
So, for all the wealth lost to fiat money, it’s not worth the convenience of transferring money faster – which also, conveniently, permits the central banking cartel to track my purchases, easier, resulting in more efficient theft on their part.
Meaning, you wouldn’t have to trade currencies.
Here’s Ron Paul talking about how fiat currencies interfere with trade among people of different countries:
Classic Ron Paul – 1988 Campaign Interview (part 2)
http://www.youtube.com/watch?v=Tpp5XOJPGlM