07 Aug 2021

Bob Murphy Show catch-up

Bob Murphy Show 16 Comments

Yikes, here are the latest episodes:

BMS ep. 208: Per Bylund on the Importance of the Austrian School

ep. 209: Bob Murphy Critiques Curtis Yarvin’s Explanation of Inflation

ep. 210: M. Night Shyamalan Is Giving You Permission to Be a Superhero

ep. 211: Bob Murphy Explodes Popular Myths About Money

16 Responses to “Bob Murphy Show catch-up”

  1. GoneAnon says:

    I think you were a bit unfair to Yarvin as it concerns the whole debt/equity discussion. I find it literally unbelievable that Yarvin would not know/understand that, in conventional accounting methodology, debt and equities are technically separate things. I’m certain that his point here is to suggest that, for the purposes of the analysis he is currently engaging in, they function similarly and thus can be treated interchangeably. No, he doesn’t explicitly declare this, but that’s just a part of his (for better or perhaps in this case for worse) writing style. Note that as it concerns this particular post, I’m more on your side here – I don’t actually agree with his analysis – but I feel like you’re making him out to be stupid or ignorant when he’s not.

    To use your whale/fish analogy, if you asked someone how to go about hunting a whale, the right answer might very well be something like “since whales live in water, you should hunt them similar to how you would hunt a large fish.” The fact that the whale is technically, by one particular classification system that is concerned with things not explicitly tied to hunting, considered a mammal, is irrelevant. If you suggested someone hunt a whale by getting on a horse and trying to drive a herd of whales off of a tall cliff (a hunting technique that is useful for many large mammals) you would laugh at them. It would make no sense.

  2. random person says:

    Have you uploaded Episode 210 to Youtube?

    The automated transcripts that seem to accompany a lot of Youtube videos are helpful to going back and re-listening to specific points in an audio recording sometimes.

    • random person says:

      Well, in any case, at some point in Episode 210, you talk about regimes toppling.

      I believe the most uplifting documentary I’ve seen on that topic was called “Pray the Devil Back to Hell”, which is about a bunch of pacifist women in Liberia who successfully overthrew both a dictatorship, whose army was running around murdering and raping, as well as a group of rebels, who were also running around murdering and raping. Afterwards, the women established a democracy and elected Africa’s first woman president. (Note this is likely not counting women leaders of tribal democracies.)

      Apparently, you can now watch this documentary for free on Vimeo:
      https://vimeo.com/188872289

      Note that their tactics might not qualify as pure pacifism in strict Tolstoyan terms. However, I believe they qualified as pacifists in Machiavellian terms.

      The 1987ish revolution in South Korea is another interesting case of a peaceful revolution. (Again, it probably wouldn’t count as perfectly peaceful in strict Tolstoyan terms, but I’ve never heard of a successful revolution that would meet strict Tolstoyan terms. Rather, when people speak of pacifist or peaceful revolutions, it should be understood that we are speaking of Machiavellian pacifism, not Tolstoyan pacifism.) In the South Korea, one major factor in setting off the revolution was outrage over the death of a student named Park Jong-chul, who was tortured to death by police.

      nvdatabase [dot] swarthmore [dot] edu/content/south-koreans-win-mass-campaign-democracy-1986-87

      nytimes [dot] com/2016/12/10/world/asia/south-korea-protests-history.html

      Gene Sharp is one philosopher who has written about Machiavellian nonviolence. According to Gene Sharp, “Nobody abandons violence if it is viewed as the most effective means of struggle. People will only accept nonviolent struggle if it is more effective than violence.”

      csmonitor [dot] com/1986/0616/asharp3.html

      One unsuccessful violent revolt was the revolt of the Pende in 1931, in the Belgian Congo. However, it’s worth noting that while the revolting Pende did use violence, they were fighting with bows and arrows versus machine guns, so it was a grossly unbalanced fight. Machine guns are clearly much more violent and destructive than bows and arrows. The Pende were angry about being ensl*ved by the Huileries du Congo Belge (a subsidiary of the English company Lever Brothers), the Compagnie du Kasai, and the Belgian colonial government. Shortly before the revolt, 47 men where whipped with the chicotte in a place called Kilamba for having failed to meet a palm fruit quota. (The ensl*vers in this time and place demanded palm fruit, which was probably used for making soap to be shipped to Europe.) Additionally, some of the ensl*vers had raped some women. The husband of one of the raped women demanded reparations from one of the rapists and was subsequently beaten. The rapist then lodged a complaint about the aforementioned husband of one of the rape victims, without actually mentioning the rape incident in his complaint. Thus it was that a Belgian official was sent to investigate, without having any idea what he was walking in to. The Belgian official tried firing some shots into the air to attempt to disperse an angry crowd, and was subsequently killed by the husband of one of the rape victims.

      Jules Marchal estimates that at least 1,000 Pende were killed during the revolt and ensuing repression, as the Belgians continued to torture a number of the Pende to death even after they surrendered. On the other hand, only one of the soldiers under the command of the Belgian Colonial government was killed during the engagements, and 2 died during accidents during the course of events. Three soldiers under the command of the Belgian Colonial government were badly wounded. In any case, a very small number of casualties relative to the number of Pende killed. Such is the power of machine guns versus bows and arrows. And to further complicate matters, some of the soldiers may have been ensl*ved by the Belgians as well. (Because apparently, forcing people to be soldiers is a thing that has happened, historically speaking.)

      However, it’s worth noting that neither violent nor nonviolent revolutions have 100% success rates. In “Why Civil Resistance Works: The Strategic Logic of Nonviolent Conflict”, Erica Chenoweth and Maria J. Stephan do show that, at least in recent decades, nonviolent revolutions do have higher success rates than violent ones, and yet neither category has a 100% success rate. (Again, please understand that “nonviolent revolutions” means “revolutions that are nonviolent in Machiavellian terms”.)

      I think that, while in movies, good may be stronger than evil, in real life, this is not always the case. It may sometimes be the case, but those who wish to accomplish good must study up on their strategy. (Or, possibly, receive divine inspiration. That could also work.) While movies may, to varying extents, be inspired by real life, they often aim to cheer us up by giving us a more optimistic view of humanity than what we might get if we read history instead. On the other hand, truth can be stranger than fiction: “Pray the Devil Back to Hell” is actually a very uplifting documentary.

  3. guest says:

    Regarding ep. 211: Bob Murphy Explodes Popular Myths About Money:

    I haven’t listened to the episode, yet, but I took a look at the article, “Four Myths About Money That Ought To Die Forever”.

    In it, Bob says:

    “Money is not a claim on goods and services, the way a bond is a legal claim to (future) cash payments or the way a stock share is a claim on the net assets of a company. On the contrary, money is a good unto itself. If you own a $20 bill, no one is under any contractual obligation to give you anything for it.”

    While I agree with all the words being said, I think that the meaning he pours into them is different from mine.

    It’s true that money is a good unto itself, but it’s not true that its use as money is what makes it a good.

    Rather, real money is first, and fore most, already a good which people value for its non-monetary uses. Something can only be money if it is also a good. This is the reason money is a good unto itself.

    Since Bob believes that money can exist without a link to use-value, I believe Bob would disagree.

    One objection I discovered while perusing Peter Schiff’s Twitter feed, when Peter said that gold’s value ultimately derives from someone’s future valuation of gold as a metal, someone responded by saying that gold’s metal value is like $10, which isn’t true but the objector was thinking of the metal gold like any other metal.

    This objection has also been used by Bob in the form of his belief that a greater use of gold as money rather than as a good seems, to him, to prove that gold’s money-value is greater than gold.

    But this ignores how arbitrage opportunities work.

    As an example, there was a kid in California who, through a series of barters, was able to exchange his iPhone for a Porsche:

    Got an old cell phone? Trade it for a Porsche
    [www]https://web.archive.org/web/20130303130111/http://www.examiner.com/article/got-an-old-cell-phone-trade-it-for-a-porsche

    But according to the logic of the above objection, this series of trades could not logically happen because an iPhone is worth far less, in dollar terms, than a Porsche.

    The reason it *could* take place, and make everyone involved in the series of trades better off, is because of how arbitrage works.

    Since money is merely a proxy for my valuations of the goods I can buy with it, the money, itself, is not the source of my valuations of any given purchases but rather it’s my valuations for the goods I can buy with money that are the source.

    Further, as even Bob has said in the past, money is not a measure of value. Or, as I have said, nothing has intrinsic value, not even money.

    Further still, all trades are logically and necessarily are for goods of different values, otherwise there’d be no reason to make the trade (because you already have something that you’d consider of equal value to the thing you’re trading for).

    All that needs to happen for trades involving goods with different monetary values to happen is that the cost of acquiring money and making the purchase in money, in that moment in time, has to be greater than one is willing to bear, such that a barter transaction becomes more cost effective (in terms of opportunities gained or foregone).

    That’s why the argument that “gold’s (“real”) monetary value is derived from its use-value” can still be true even if most people used gold as money. Someone’s value for gold as a metal with certain qualities, is greater in terms of what others can get from him in return for supplying the gold, that it creates arbitrage opportunities for those who can acquire gold but don’t want to use it as a metal.

    That is, the guy who wants the gold for its use-value is willing to give a supplier of gold something of greater value than the supplier’s costs, and so on.

    • guest says:

      Whoa, I just saw this in that same article:

      “No one is forcing you to accept green pieces of paper when you sell things.”

      Maybe you were caught up on one branch of your argument or something, but I find it hard to believe that you hold this position.

      What about legal tender laws? What about when you said, in the same paragraph:

      “Although (as a libertarian, Austrian economist) I fully condemn the monetary history of the United States, and deplore the means by which the public was forcibly weaned from the gold standard”

      Those forcible means are ongoing. To this day.

      If the government didn’t force people to use paper through legal tender laws (and trying to prevent other countries from circumventing the fiat system with a gold system), our paper money would have been abandoned a long time ago.

      We are currently being forced, at gunpoint, to use paper (and, soon, digital information) as money.

    • Tel says:

      People typically believe that money is a claim on future goods … in as much as if you ask someone “What use is money? Why do you have it?” they would say, “So I can buy things.”

      However money is not a specific claim on specific goods, it’s more of a general purpose broad claim. When I go to the supermarket with government-approved money then I know that the supermarket must accept my money and allow me to buy goods … in that sense it is a claim at least to have the opportunity to get some goods, even if I don’t know what I’m buying until I get there. Of course prices might change, and they often do change, but the general expectation is that they won’t change all that much.

      Does it make sense to have a claim applying in a non-specific manner? Well, I think most people can understand the general concept … and with social conventions, if enough people believe it and behave like it’s true, then it might as well be true. However, if that’s not good enough then consider many other similar situations exist. Suppose you have a publisher who pays for a book in advance, and the author has given some outline of what’s going to be in the book but the publisher does not precisely know every detail of the book. The publisher has a claim on some future item that is only specified in a vague way, but this still hangs together as a contract. When I buy shares I have a claim on future earnings of that company, but I don’t know precisely what those earnings will be, and usually the shareholders cannot even determine exactly what goes on at the company from day to day. I’m just trusting that the management have it under control and they will do their best to produce a profitable outcome. You just have to understand that there’s risk involved and all possible choices in life are risky one way or another. The perfect business contract will never be written because it would need to be infinitely long.

      As for money itself being a good, there’s a bunch of ways to consider it. Money as a concept (i.e. the idea of trading for an intermediate note instead of bartering for the final product) has a value in as much as it makes life easier. Same as other ideas have value … Pythagoras Theorem has a value because it’s useful, therefore people put effort into learning it. That’s not to be confused with the trade value of each individual piece of money. Governments might devalue individual notes in your hand, but it’s incredibly difficult to destroy the entire concept of money … everyone would switch to using something else for the same purpose. Government might attempt to go full Magic Money Tree while simultaneously cracking down on every possible alternative, introducing draconian laws against cryptos, etc. That would effectively destroy the economy itself … and I’m guessing the whole thing would fly apart in an ugly way if they tried that.

      As the guest mentions above, money can simultaneously be a commodity and therefore a good unto itself … that’s a situation which has worked well in the past, and to some extent we still have that now. The commodity value of a US Federal Reserve Note is the government violence (and threats) required to get people to keep using them. If government wants to print more notes (i.e. more supply), while maintaining the same real value, then they need to up the violence (i.e. force more demand) which might include raising taxes or putting greater effort into financial repression. There’s no intrinsic reason why bads can’t be a commodity … when you think about it, you pay your tax in order to avoid bad things happening unto you. Government threatens you with bads, to make you cough up the goods.

      Even it you don’t accept the idea of violence as a commodity, you still end up with the good old fashioned commodities regularly getting dragged into the cycle of government violence. One historical example was the recoinage of 1279 ordered by King Edward I … it was quite profitable for the coining mints which got paid a fee for coins produced and also profitable for the King who got a share of the seigniorage. It was unprofitable to the people who brought in their old pennies only to get back a lesser number of new pennies … but the problem was that in August 1280 the old pennies became illegal, and only coins of the new design were permitted. These cycles of recoinage became a popular venture for Kings and their cronies … by the time we got to King Henry VIII the weight of a silver penny was about 0.7g while the official “Pennyweight” being the nominal amount of silver that a penny supposedly represented was about 1.56g. This business has been going on for a long time.

      • guest says:

        (I begin each section of my response with your words in bold, for readability. Sorry for the TLDR.)

        “Does it make sense to have a claim applying in a non-specific manner? …”

        “… You just have to understand that there’s risk involved and all possible choices in life are risky one way or another. The perfect business contract will never be written because it would need to be infinitely long.”

        Trust me, I understand what you’re trying to say – the same risk and non-specificity of what money could buy would also exist under my preferred gold-coin standard.

        What you’re attempting to show is that, since there’s going to be non-specificity in any monetary system, then why harp on the non-specificity of a non-commodity money’s link to use-value.

        First of all, there would be some degree of risk and non-specificity of (psychic) profit under a barter system for the same basic reasons as under a gold-coin standard: maybe your neighbor won’t want the same things in trade in the future, and you’ll have to repurpose your capital into some other production process.

        That non-specificity of expected profit wouldn’t then prove that you don’t need to accept real goods for your barter goods – all it means is that you have to factor in those risks into your barter prices and into the organization of your resources (not putting all your eggs in one basket, etc.)

        So, non-specificity of expected profit is not a sufficient grounds to reject a link to use-value because, even in an economy where everyone expects actual goods (for their direct use-value) in trade, those risks would exist.

        As far as the non-specificity of purchasing power under my preferred gold-coin standard, the perception of gold’s future purchasing power doesn’t need to be pinpoint accurate in order for gold to be valuable as a money – one just needs to factor in the risks of being wrong into his gold-prices.

        One doesn’t even need to know exactly what he will buy with his gold when he accepts it as money so long as he expects that the range and amount of things he will be able to buy will be more valuable to him than the goods he is giving up and the delay in satisfaction (a trade is not complete until goods have been accepted for goods [or services]).

        Or, as Rothbard said, in Man, Economy and State:

        “Now, to decide which alternative course he will take, the man compares the utility of the highest-ranked single use of a lump sum of 60 ounces (say, the purchase of a car) with the utility of the “package”—the expenditure of five ounces on a, five ounces on b, etc. Since the man knows his own preference scale—otherwise he could never choose any action—it is no more difficult to assume that he can rank the utility of the whole package with the utility of purchasing a car than to assume that he can rank the uses of each five ounces.”

        (The point being that a “package” or set of goods/opportunities realized can qualify as a marginal unit.)

        So long as one’s payment in gold results in an, as yet unspecified, better outcome than the costs incurred to acquire the gold, he will have made a profit. He may not know what that looks like, specifically, but he can reason that the amount and kind of goods he will buy in the future will result in him being better off than not making the sale.

        Anticipating an objection: In the case of a gold-coin standard, the specificity of the money’s link to use-value may not be known with precision, but it can be known to exist. That’s different from the non-specificity of paper or bitcoins, where the trade-value is essentially made up.

        Unfortunately for the pro-bitcoin or pro-fiat position, real goods and services, although subjectively valued, are not made up, and resources are scarce. Non-commodity monies can’t help you value scarce resources – such made up valuations ultimately bend to real resource constraints, whether it’s in the form of a destruction of the monetary system as the real value of zero is finally realized, or as governments have continuously done (to Tel’s point about the longevity of fiat currencies), propping up the trade value of a fiat currency by making some people poorer, even to the point of death – each dead person is one less person to owe purchasing power to, and the same is true, to a lesser extent to the people made poorer.

        Either way, because real resources are scarce and not made up, markets always clear.

        “Well, I think most people can understand the general concept … and with social conventions, if enough people believe it and behave like it’s true, then it might as well be true.”

        With no link to use-value, that’s essentially a Ponzi Scheme – someone else believes in the Ponzi Scheme which is why a few, but not all, parties can still benefit from investing in it.

        I keep trying to show that “believing hard enough” cannot confer a would-be money with the capacity to enable economic calculation with my “handfuls of dirt” analogy.

        Pro-bitcoiners respond by saying nobody expects to profit off of holding handfuls of dirt, but that just proves that there’s a resource constraint on what can, or can not, be used as money.

        Pretending that the arbitrarily made-up values of bitcoins and fiat can enable economic calculation of scarce resources just postpones the inevitable. If you’re willing to be impoverished enough, you can keep any failing non-commodity currency afloat for awhile – because people who are being robbed are, in effect, taking less scarce resources from the economy.

        “The commodity value of a US Federal Reserve Note is the government violence (and threats) required to get people to keep using them.”

        Ahh, but that’s essentially the Broken Window Fallacy – destroying your wealth by forcing you to use as money something you don’t value is supposed to make the money valuable because you have to use it in order to preserve some of your wealth.

        Breaking a window makes the glass-man “valuable” (because you need the window), but if you didn’t break the window in the first place, you’d have a window and whatever else you could buy with the money you paid the glass-man.

        So, the breaking of the window is not what gave the glass-man his value; Rather, it’s the wealth that one wishes to preserve that gives the glass-man his value, and having to pay the glass-man is a net loss, even though he will have more wealth by paying the glass-man than if he hadn’t (because breaking the window results in less wealth than not breaking it).

        The same is true of government fiat money. It’s not the violence of legal tender laws that confers value on fiat money, but rather the wealth that we wish to preserve. Logically, you are at a net loss for having to use the fiat currency even though you have more wealth by using it than by not using it (because you are poorer for being forced to use the fiat money than if you were not forced to).

        • Tel says:

          What you’re attempting to show is that, since there’s going to be non-specificity in any monetary system, then why harp on the non-specificity of a non-commodity money’s link to use-value.

          Essentially yes. Some systems might be worse than others, but then you would need to offer a metric that could distinguish good from bad. The general metric used is price stability, and of course perfect price stability is impossible and would anyway defeat the purpose of having a price system … we are left with some general overall long term price stability and that’s kind of what most people mean by “inflation”.

          Let’s look at Scenario A where a bad storm destroys banana crops and bananas are in short supply for a year. Someone goes to the supermarket and the price of bananas has doubled overnight, and they wanted to get bananas but they won’t pay that price, and end up going home with apples instead which was not their intended purchase. Clearly in this case the customer had some imaginary idea that the money in her hand would translate to a bunch of bananas, but ultimately events prevented that from happening. That non-specificity had a negative consequence, but it was unavoidable because bananas really were hard to come by for an understandable reason.

          Now consider scenario B, where government is busy printing money and the same customer goes to to supermarket and each day sees various prices going up by 5% here and 10% there, and over 6 months just about every price in the store is up perhaps 20%, except for some items which simply are no longer stocked and those handful of items that have not gone up in price appear very low quality. Clearly in this scenario customers are also disappointed that they cannot buy as much as they wanted, however there was no natural storm here … it was a man made wealth transfer.

          All economic systems are going to need ways to deal with Scenario A, but perhaps the Scenario B is avoidable.

          Under a barter system, you might be an egg farmer, and you exchange the eggs with various other farmers. In the worst situation, you can still eat the eggs … although if all the other farmers all refuse to exchange with you on the same day you might think perhaps you have offended someone, or at any rate you eggs have been devalued for some reason … maybe someone put about a rumor that eggs cause heart disease or other rubbish like that. That’s closer to Scenario B I think, but perhaps it’s a different thing again. Anyhow, there’s risks, often from unexpected places.

          As far as the non-specificity of purchasing power under my preferred gold-coin standard, the perception of gold’s future purchasing power doesn’t need to be pinpoint accurate in order for gold to be valuable as a money – one just needs to factor in the risks of being wrong into his gold-prices.

          One doesn’t even need to know exactly what he will buy with his gold when he accepts it as money so long as he expects that the range and amount of things he will be able to buy will be more valuable to him than the goods he is giving up and the delay in satisfaction (a trade is not complete until goods have been accepted for goods [or services]).

          But that all works for fiat systems as well. Indeed, that’s exactly what you will get told if you question inflation in the current environment … the central bank gives helpful forward guidance, they explain their vision of the economy and where they think monetary policy is headed or, and you can always factor in the risks accordingly … blah, blah, blah goes the excuses … besides inflation is transitory and that means don’t worry about it.

          We all know their forward guidance is unintelligible, the risks are deliberately understated and there will for sure be people who get caught out, at which point the Free Market is always to blame.

          How do you actually measure that though? If risk can be factored in, then in a way no one has anyone to blame other than themselves. If you think that fiat money inflation is going to be very high then go get yourself a loan at low interest rates and you should make a healthy profit, right?

          • guest says:

            “But that all works for fiat systems as well.”

            I realize that pro-fiat and pro-bitcoiners believe they see the same “solutions” in their preferred (accepted?) monetary systems, but please don’t miss my point.

            I am, here, simply responding to objections that pro-fiat and pro-bitcoiner people have to the pro-only-commodity-money position.

            Remember that I actually anticipated your response:

            “Anticipating an objection: In the case of a gold-coin standard, the specificity of the money’s link to use-value may not be known with precision, but it can be known to exist. That’s different from the non-specificity of paper or bitcoins, where the trade-value is essentially made up.”

            It’s hard to see what I’m saying when you already have a generally strong infrastructure, supply chains, and goods that came about as a result of advances made under a prior gold standard and a generally free market.

            It’s easier to see when you imagine a scenario with no production and then ask people to use intermediary tokens to facilitate trade.

            It’s the goods that are tradable, not the tokens – and the tokens can’t get you started because trades can never be equal in value such that an intermediary token could measure that equal value.

            What’s keeping the fiat money system afloat is, again, the legal tender laws, the deals made with other countries to supply military aid in exchange for *only* accepting FRNs for oil, and the exporting of our inflation in the form of treasury bonds sold to foreigners.

            The longer foregners don’t spend the FRNs here in the United States, the longer America can postpone the crash of the fiat monetary system.

            And since all we’re doing is printing money to pay for imports, eventually those FRNs are going to be worth less in increasingly more countries until foreigners (rightly) stop accepting FRNs.

            The current structures of production that allow Americans to enjoy the great wealth it has, today, at this moment, are the result of the American government robbing other countries through essentially counterfeiting (or the Cantillon Effect).

            Aside: And it’s not like America *can’t* enjoy their current standard of living on a gold-coin standard (after having to first repurpose their capital into profitable production processes which would require the US to endure a severe recession for a couple of years), we would just need absolute economic freedom – the reason it took ten years to recover from the great depression was because of all the regulations.

            “How do you actually measure that though? If risk can be factored in, then in a way no one has anyone to blame other than themselves.”

            I have a similar complaing about the pro-fiat and pro-bitcoiner position that you can just make up values for money. Because if that’s true, then no amount of monetary inflation can cause an artificial boom since one’s own belief in the value of the bitcoins is what gives the bitcoins their value. If a monetary system falls, it would be your own fault.

            To your point about factiring in risk, the way you “factor” it in is by attempting to invest in production processes that seem to have the most demand, given the supply of goods – which is what all entrepreneurs are trying to do.

            Some businesses can occasionally be wrong about demand, but they would go out of business, alerting others not to produce those goods. Systemic booms and their subsequent busts just wouldn’t happen.

            (Under a gold-coin system, with gold already being loaned by banks, a large enough spike in the supply of gold would cause existing loans to be turned into malinvestments, and a crash would ensue, but not because of inflation of the gold supply, anymore than a large enough supply of drinkable water would cause a crash.

            (Rather, it would be because the commodity-gold’s use-value would be revalued to account for all the new things we could use gold for, and then, because we had plenty of commodity-gold the money value of gold would make existing loans worth far less.

            (You would be able to repay the loan quickly enough with the greatly increased supply of gold, but since gold has a use-value, it would still be worth something, so you maybe could still use it as money, or maybe you use some other good such as silver to price all the new things you can make with the help of an increased supply of gold.

            (In short, rather than non-commodity causing people to misprice things being the cause of a bubble and crash, it would be everyone revaluing the money-value of gold in accordance with a revaluing of the use-value of gold that causes a crash [without a prior artificial boom, as existing contracts weren’t based on faulting pricing], but then that crash would be short-lived because you’re still producing pretty much the right things from the perspective of consumer demand.)

            But when you use a money that does not correctly represent demand for a given supply of goods, the money is miscommunicating demand for everyone, and you get artificial booms that necessarily result in crashes / corrections.

      • guest says:

        A bit if an aside, but relevant:

        Fairly recently (I forgot the source post or episode), Bob responded to the claim that the amount of bitcoins could effectively exceed the mathematical limits imposed by the blockchain tech – thereby enabling an infinite supply – if people simply made *claims* to bitcoin (the way fiduciary media did to gold coins).

        Bob responded by correctly pointing out that money substitutes are not, themselves, the money.

        His point was that bitcoins would still have a finite limit, and people would prevent inflation of the bitcoin sibstitutes by simpy demanding the actual bitcoins.

        Here’s the thing, though: substitutes-for-bitcoins are to bitcoins what FRNs or bitcoins are to gold.

        Bob actually believes that the FRNs are, themselves, money. A consistent position, then, I would think, would be that if you believe that “believing hard enough” in a currency is what makes something a money, then there’s no logical reason why you wouldn’t also conclude that creating claims to bitcoins could result in 1) those claims becoming money, and 2) thereby effectively remove the artificially imposed limit on the supply of bitcoins.

        So either pro-bitcoiners have to accept that claims to bitcoin can result in a legitimate money that exceeds the supply of bitcoins, enabling an infinite supply of legitimate money units – because that’s what pro-bitcoiners are arguing when it comes to gold, that money doesn’t have to mean anything (I don’t believe in intrinsic value, fyi).

        Or they have to follow the logic of money-substitutes not being money and reject that FRNs and bitcoins can ever be money.

        Again, claims to bitcoins are to bitcoins what FRNs and bitcoins are to gold. What you believe about the relationship between claims to bitcoins and bitcoins has to hold for what you believe about the relationship of FRNs and bitcoins to gold.

        • Tel says:

          Bob responded by correctly pointing out that money substitutes are not, themselves, the money.

          I should point out that Bitcoin “classic”, as in the small block size Bitcoin with expensive and slow transactions, is gradually moving over to the Lighting network as a way to cope with the transaction volume and keep costs down. That means most of the small purchases done on what is often called “Bitcoin” do not in fact involve any transfer of bitcoins,

          Here’s the thing, though: substitutes-for-bitcoins are to bitcoins what FRNs or bitcoins are to gold.

          Yeah … and people are already using the substitute more than the real thing, because it’s cheaper and more convenient to do that. Just like moving notes around instead of real lumps of metal … sound familiar?

          https://cryptoeconomics-aus.medium.com/the-29-trillion-cost-of-trust-be8ffbd5788d

          Sinc has a fair argument that most economies are built on trust, one way or another. For example the credit based economy is based on the trust that someone is good to pay back their debts … but this applies to all contracts, and even to barter where parties come back for repeat business and don’t want to be ripped off.

          The problem starts when you have network effects, and the local trust relationships end up out of whack with the global picture of what is achievable. A crypto coin is designed to ensure that discrepancy cannot happen … but with sufficient layers of substitute media it becomes no longer possible to reconcile at a global level. This makes sense because at some stage the global system is simply too big and complex as compared to buying a coffee and a cake in the here and now.

          • guest says:

            “Yeah … and people are already using the substitute more than the real thing, because it’s cheaper and more convenient to do that. Just like moving notes around instead of real lumps of metal … sound familiar?”

            I’ve already addressed this with the “cell phone for a Porche” story.

            It’s not that the money-value of gold became “more valuable” than its use-value, it’s that its high use-value made it useful to hold onto for the future, making it a good medium of exchange.

            It’s the same value, just with arbitrage involved. The money-value is derivative of its use-value.

            That’s what made it possible for a kid to trade up from a cell phone to a Porsce, even though the Porsche has a much higher money-value than the cell phone.

            So attempts to show that the higher use of a commodity as a money than as a commodity proves that a money has its own value just for being a money doesn’t work against the pro-gold-coin position, because that’s not what happened even when gold-coins were used as money.

  4. Tel says:

    Some random noise to keep everyone amused and confused … all rates are percent per annum, and where an index like PPIACO or the lime green wages line are plotted I use “Percent change from a year ago” to convert that into a growth rate. Everything is based on nominal values, nothing is inflation adjusted and hopefully nothing is seasonally adjusted either. All data series are monthly, and where necessary averaged down to a monthly series.

    https://fred.stlouisfed.org/graph/fredgraph.png?g=Gc7v

    Mortgage rates are a nominal growth rate … in as much as if you don’t pay your mortgage at all, that is the rate at which the debt will grow. We see that for most of the chart these are the highest rates, although I put the stock market index (Wilshire 5000) as a general indicator of whether stocks are going up or down each year and because it’s so volatile it uses the right hand axis. Otherwise you lose visibility of the other indicators.

    The recent year has some interesting things: both the pale blue (stocks) and the dark blue (commodities) are growing at astounding rates. The PPIACO was pretty much under control for most of the Obama and Trump years but now they are letting it surge. Mortgage rates continue to fall, despite the obvious inflation. Presuming manufacturing wages are indicative of typical wages (we can argue that separately) we see wage growth actually higher than mortgage rates. It makes more sense to NOT pay your mortgage, or at least pay as little as you can get away with, because next year your wages will grow faster than your debts.

    Seems to me that either wages must grow at a slower nominal rate, or else mortgage rates have got to go up, perhaps both of those. Commodity prices are growing at a nominal rate of 20% year on year which is really higher than all of history except for the 1970’s stagflation. I guess we will see how long this holds out for but something is going to give … they just can’t money print like this for much longer.

    • random person says:

      Mortgage rates continue to fall, despite the obvious inflation. Presuming manufacturing wages are indicative of typical wages (we can argue that separately) we see wage growth actually higher than mortgage rates. It makes more sense to NOT pay your mortgage, or at least pay as little as you can get away with, because next year your wages will grow faster than your debts.

      I’ve heard other people make this argument, but it doesn’t feel quite right to me.0

      I think part of the issue is that what is true for a statistically average member of a particular demographic, isn’t necessarily true for each an every individual member of that demographic.

      E.g., maybe the average wages for waiters and waitresses (as an example) are rising, but perhaps a specific waiter is working at a restaurant that goes out of business, and is then unable to find a new job or other source of income for awhile. Perhaps, long enough to miss enough of his mortgage payments to get foreclosed on.

      There’s a guy here who explains that paying off his mortgage early is a mistake he will “never regret”.

      https://www.physicianonfire.com/paying-off-mortgage-mistake/

      Some days I wonder how much further ahead I’d really be. However, I am confident with the decision I made. While daunting and strenuous to pay off the mortgage, by the end of 2012, I was able to breathe a sigh of relief. I had reached my goal of paying off my house and felt an incredible sense of accomplishment. I finally had some excess cash at the end of every month that I could freely choose how to spend. It was at that point that I felt like I could start enjoying my hard-earned money.

      More importantly, no longer having debt allowed me to relax at work. I was no longer uptight or worried about losing my job or a demotion. Therefore, I took more chances at work, which involved taking riskier positions in order to move up.

      Unburdened by the mortgage, I was able to implement changes that I felt were necessary to do the jobs correctly, which in some cases ruffled some feathers, but ultimately proved to be the right decisions. My bosses ultimately rewarded me with multiple raises and promotions.
      While I may not have come out ahead when you solely compare paying my mortgage off versus investing the stock market, I believe I came out ahead when you factor in my salary increase and bonuses that I received.

      I also factor in the peace of mind of never having to worry about a mortgage payment again. Hence, there are more variables involved than just stock market returns and mortgage interest rate figures. This is why I am still an avid proponent for paying off your mortgage early.

      I think the threat of foreclosure is a major factor of what drives people in the unfortunate economy we live in to seek jobs.

      I was reading earlier today about how, historically, a lot of people in Los Angeles tried to build their own homes (which, if it had been allowed, presumably would have meant no mortgage) and had their homes demolished by brutal Los Angeles officials.

      According to Frank Shyong,

      When thousands of unemployed white men began to settle around a Southern Pacific Railroad passenger terminal in the late-19th and 20th centuries — the area now called skid row — they tried to build their own housing on undeveloped lands. City officials designated these structures and people as a serious threat to public welfare, destroyed their temporary homes and sent them to jail. The resultant overcrowding led to a major expansion of the region’s jail system.

      [During the Great Depression,] Homeless people built shantytowns called Hoovervilles on unused land, the name intended to mock then-President Hoover’s handling of the economic crisis. When the U.S. entered World War II, the shantytowns were destroyed, and the city’s homeless multiplied.

      latimes [dot] com/california/story/2021-07-16/column-homeless-property-human

      The prices you see for even empty plots of land when you browse real estate listings, the prohibition against just building your own house on some unused land, and the land taxes… all these things serve to make people insecure in their own homes and thus subservient to the economic structure that those in power have chosen — an economic structure in which people are essentially required to “get jobs” (or find comparable ways of earning money) in order to afford homes that others have built at greatly inflated prices (relative to the cost of building your own home without having to pay any artificial costs). These costs affect renters as well, for obvious reasons.

  5. guest says:

    Another show that Bob Murphy needs to catch us up on is his appearance on The Jordan B. Peterson Podcast:

    Is Property Theft? | Dr Robert Murphy | The Jordan B. Peterson Podcast – S4: E43
    [www]https://www.youtube.com/watch?v=_OtZ49i-yyk

    Jordan Peterson actually *sought you out* to explain to him the Austrian School of economics from the ground up. That’s insane!

    This thing is two and a half hours long, and it’s totally worth it. You’ve just introduced all his fans to the Austrian School.

    And he’s asking all the right questions, too.

    All in all, this was excellent, and this is yet, another video I want to share and save for forever.

    • guest says:

      A commenter on the video says:

      “No. He should talk to a post Keynesian”

      (because someone suggested that Jordan should interview Peter Schiff, Tom Woods, etc.).

      If I remember correctly, Bob has said he took classes that were taught by post-Keynesians.

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