Comments (70)

• Alan R

  Why "abolish the other pervasive and artificial legal privilege of limited liability incorporation "? What is wrong with limited liability for shareholders or corporations?

  Published: May 24, 2006 9:40 AM

• Paul Marks

  Remember that gold is not enough on its own - one must have the "iron" to defend it.

  Otherwise one is the position of the people President Roosevelt plundered in 1933 (when he ordered, with the consent of Congress, that contracts that specified gold be violated and that privately owned gold be stolen). Or a worse position.

  Also (of course) a formal "link" to gold (or some other material) is not enough for a good financial system.

  In theory the United States was "on the gold standard" in the 1920's yet (as Sean Corrigan knows) this did not stop the fractional reserve banks and other financial institutions (supported by the Federal Reserve Board) creating a vast credit-money bubble.

  Indeed there have been such bank created credit-money bubbles in the United States since at least 1819 (see Rothbard's "The Panic of 1819").

  It goes back to the effort to try and lend out more money than people have really saved.

  If Mr Jones wishes to borrow one hundred Dollars someone else must be prepared to GIVE UP this hundred Dollars (in order for it to be lent to Mr Jones), this person or persons will only get the money back when Mr Jones repays his loan. Mr Smith (or whoever) can not have the hundred Dollars at the same time as Mr Jones has it.

  All the vastly complex schemes of the "financial sector" are efforts to find ways round this simple point - and such schemes always end in tears.

  Government tries to support the various book keeping tricks of "credit expansion" by (for example) declaring that such tricks are in no way fraud - but government can only change the laws in the law books (it can not change economic law).

  As for busts:

  In 1921 there was a credit money bust - and yet people adjusted prices and wages and the economy was growing again in six months.

  All President Warren Harding did was to radically cut governement spending.

  In 1929 there was another credit money bust. President Hoover and Congress went into overdrive - big increases in government spending, later big increases in taxes (including taxes on imports), and (above all) efforts to prevent prices and wages falling.

  The result was the Great Depression. Sadly the very policies that caused the Great Depression were kept and extended by President Roosevelt - so for the first time in American history there was no quick recovery from a bust.

  What is more likely now (in the United States or elsewhere). The line of policy followed by the "evil", "corrupt" Warren Harding, or the line of policy followed by President Hoover and President Roosevelt.

  Sadly we all know that a bust would be used as an excuse for even more interventionism.

  So keep your gold (and other materials) safe - but also work out a way to defend them.

  Things are going to get a lot worse before they get better.

  And these days with have the added problem of the vast Welfare State entitlement programs (started in a very small way by President Roosevelt in the 1930's, but mostly dating to President Johnson in the 1960's) - none of these programs can be sustained.

  For those who will say "I live in Britain, not the United States" - our credit money bubble is a least as bad, and our Welfare State problem is worse.

  The British economy is more of House of Cards than the American one is.

  Published: May 24, 2006 9:41 AM

• Paul Marks

  On limited liabilty.

  I agree that corporations have many unjust advantages - but these are best dealt with by stopping the attacks on individuals.

  For example, one should not tax pension funds on the grounds that individual savings and investments are taxed (the excuse that Mr Brown used in Britian) - one should get rid of such things as Capital Gains Tax.

  Just as inheritance tax (which, of course, corporations do no pay) should not exist.

  People should be allowed to inherit business enterprises - not be "trust fund kids" who can inherit an income but no control and responsibility.

  Also the regulations that benefit corporations (such as the Williams Act of 1967 that makes it difficult to take over a corporations and fire its managers) should be abolished.

  But limited liability itself?

  What if people KNOW what sort of organizations thay are doing business with?

  Is this different from signing a contract with an indiviudal who agrees to pay - but reserves certain assets to himself (with the full knowledge of the person he is doing business he is doing with).

  One can say that it is very unwise to do business on these terms - but it should be allowed.

  I can remember when it used to be normal for a limited liability company to say that it was - in Britian it would be such and such a company "limited" - and in the United State in would be such and such an enterprise "incorporated".

  Perhaps that should be the norm now.

  As for the modern practice of corporations being mostly owned by other institutions (such as pension funds) - so that there are no real owners (i.e. individual shareholders own a small fraction of the stock) - just hired managers in control of other hired managers and all sitting on each others pay review bodies. That is mostly a creation of modern taxes and regualations.

  Even in Britain most stock was still owned by individuals as recently as 1965.

  Published: May 24, 2006 9:53 AM

• David C

  First, contrary to the article, I think the information age is quickly making it impossible to lie to people about the value of their money. I really think that once it goes, the central banking system will not only go, but that the funny-money system will be dead permanently like the plantation system before it. IMHO, the future is not paper money, but e-gold. Second, we are very capable of a collapse far harsher than the south-sea bubble. The fed can create a few trillion with just a few keystrokes on a computer, walmart can rase prices in all stores within 3 hours, currency markets can trade over 2 trillion dollars per hour, and there are over 250 trillion in notational value of derivatives contracts (24 trillion interest rate sensitive alone), and if there is any kink in the system the notational value will quickly become the liability value. Not even helecopter Ben can save us from that one, so don't be supprised to wake up one morning to find the financial world ruined. Third, every central bank on the planet has gold in their valuts for a reason. People can trust that it is real money, and real money that can't be abused. I imagine that after the collapse, gold and silver will not only be money, but will be the only money that people trust for quite a while. Fourth, the third world is emerging as a market and there are at least 3 billion people out there who naturally see gold and silver as money. While countries like the US could get away with digital currencies backed by say coal, thrid world countries do not have this electronic infrastructure and will not for a while. When they refuse to accept paper money, there will only be one choice: Gold.

  I think the reality is that once the paper money system collapses, there is only going to be one option that people can trust and businesses can trust for international trade. Gold and silver. After all, what the heck else are they going to accept, barter? another paper? When I was a youg kid in the late 70's some gas stations charging 10 cents per gallon, because most dimes back then were silver. Not to menation that the US constitution blatently says it - which didn't stop them from killing gold currency, but which also doesn't leave much room for alternatives when things go to hell. Maybe people aren't accepting gold and silver now, but I can almost guarantee it - they soon will be.

  Published: May 24, 2006 10:08 AM

• Don B

  The Corporation is an artificial contrivance that socializes risk in an artificial manner. It alters the calculation of risk on the part of the investor in some ways not so different from inflation. There is no place in Austrian thought for believing that risk should be removed while reward should not (or vice versa). For those who would say that removing limited liability would dampen growth (i.e., entrepreneurial risk taking), I would suggest two things--you would have more honest growth through more prudent (or at least risk/reality-based) decision making in a genuine risk environment that reflects the full potential benefits AND risks. I suspect there would be a different legal environment (that I can't define since it wasn't allowed to develop) but one possibility would be a standard of pro-rata liability versus joint and several. There is a corellary issue of bankruptcy ( I struggle with the right to walk away from your debts and make others pay for them) though in a non-limited liability society and non-inflationary society, savings would be higher, real income would be higher, job opportunities greater and risk better managed, dramatically reducing the incidence of bankruptcy in the first place.

  On the issue of glod as money, I've said it before. Gold is a rock. Money is a concept. Gold simply has inherent attributes (though no intrinsic value) that make it fulfill the role of money exceptionally well--better, it would seem, than anything else. Though it does not function perfectly as money. It can still be inflated (via new discovery) and isn't as portable or divisible as paper. That's not an argument for paper, just to demonstrate the point that it is not inherently "money" or perfect as money.

  Published: May 24, 2006 10:19 AM

• billwald

  Some of you agree that physical money is simply a book keeping artifice? With electronic transfer the physical money is unnecessary.

  Still say that inflation should be measured in terms of work hours needed to obtain shelter and consumables.

  Published: May 24, 2006 10:36 AM

• Paul Marks

  "work hours" is an idea that can be easly abused. It can be useful in thinking "how long would I have to work to buy this", but it is a terrible mistake to think "this thing is worth so many work hours".

  The economic value of a product is the subjective value it has to a person (which will be greater than or equal to the price he is willing to pay for it) - not the number of hours it took to produce it, or the number of hours work (or rather the PAY for these hours) that it takes to pay for it.

  Money evolves as a way of (for example) making exchanges and storing value.

  Money need not be gold, but it is useful for it to be some material or other (this evolves over time and becomes a convention long before the state gets involved - in the middle east certain weights of silver were money for many centuries before the invention of coinage). If it is not a material (if it is just the fiat [command] of the state, or a series of book keeping tricks) then there is trouble (for example the boom-bust credit money cycle).

  On corporations - not on the warped regulations and subsidies that I oppose as much as anyone else here.

  If a group of people form a partnership (using the term loosely - not the strict modern legal definition of "partnership") and put money into the pot for this patnership and say QUITE OPENLY that if you do business with this partnership you only get money that belongs to it (not all the possessions of the individuals involved) what is wrong with that?

  Such enterprises go back long before the limited liablity statutes of the 19th century.

  If you choose to do business (for example) with a Church or a University - you only have a claim on its assets, not on the private assets of everyone involved in it (or even those people in control of it).

  You know this IN ADVANCE.

  It was the same with commercial enterprises (that, again, go back well before the 19th century).

  Not every enterprise was or is like this (for examle the "Names" of Lloyds insurance syndicates pledged EVERYTHING they owned) but most large scale enterprises had some protection for the private assets of their share holders.

  IF you know IN ADVANCE that this is the sort of enterprise you are dealing with it is your choice whether to do business with them or not.

  Yes there is a risk that such an enterprise will go bust and the shareholders will drive away in their nice cars to their nice houses (whilst you do not get the money you expected), but that is a risk you CHOOSE to take.

  As long as you were told up front.

  That is why (I believe) we should go back to the system of always saying "such and such LIMITED" or (in the United States) "such and such INCORPORATED" so that people know what they are choosing to do business with.

  Of course (I say again) such things as taxes that hit individuals but not corps (such as inheritance tax and capital gains tax) should be abolished. As they really do give an "artificial" (i.e. state given) advantage to the corporations.

  And such regulations that help protect the managers of corporations from take over and being fired (such as the 1967 Williams Act in the United States and all of the S.E.C. stuff - indeed the S.E.C. should not exist) should be got rid of.

  Published: May 24, 2006 11:34 AM

• M E Hoffer

  This: "Gold simply has inherent attributes (though no intrinsic value)", is a grave error. Something, anything, with "inherent attributes" necessarily has "intrinsic value". Gold's value, in the theme of this thread, is derived from, both, its intrinsic & extrinsic characteristics.

  Published: May 24, 2006 11:54 AM

• Doug Wakefield

  I want to commend Sean on what I feel is one of the best articles I have read in the last two years regarding gold. His work reflects what continued studies from the Journal of Behavorial Finance, and Prechter's new Socionomics Foundation continue to uncover. As enormous as the amount of material presented on money and gold, our human instincts and the common patterns that history teaches regarding crowd behavior must never be overlooked when making decisions regarding financial capital.

  Great job Sean.

  Doug Wakefield
  Best Minds Inc.

  Published: May 24, 2006 11:56 AM

• einzige

  Let me express an opinion contrary to Mr. Wakefield's.

  I found this article to be turgid and grandiloquent, as well as periphrastic and pleonastic - so much so that by the end of it I couldn't ascertain its thesis, any supporting arguments, or even a point.

  I will submit that perhaps the problem lies with me, however.

  Published: May 24, 2006 12:10 PM

• Spice Weasel

  Any gold 'standard' is doomed. If the government controls the monetary standard, they will inevitably corrupt it. The state corrupts all it touches. Get government out of money, and the free market will take care of it.
  

  Published: May 24, 2006 12:38 PM

• M E Hoffer

  periphrastic-Adj. 1. periphrastic - roundabout and unnecessarily wordy; "had a preference for circumlocutious (or circumlocutory) rather than forthright expression"; "A periphrastic study in a worn-out poetical fashion,/ Leaving one still with the intolerable wrestle/ With words and meanings."-T.S.Eliot; (`ambagious' is archaic)
  ambagious, circumlocutious, circumlocutory
  indirect - extended senses; not direct in manner or language or behavior or action; "making indirect but legitimate inquiries"; "an indirect insult"; "doubtless they had some indirect purpose in mind"; "though his methods are indirect they are not dishonest"; "known as a shady indirect fellow"

  pleonastic-ADJECTIVE: Using or containing an excessive number of words: diffuse, long-winded, periphrastic, prolix, redundant, verbose, wordy. See EXCESS, STYLE, WORDS.

  fyi, FFR

  Published: May 24, 2006 12:51 PM

• Person

  On limited liability -- individuals can always be sued for wrongful actions they personally took. But if I loan $2000 to a milk distribution business, and it turns out to be a front for contract killings, why should anyone be allowed to attack (place in legal jeopardy) my entire net worth? If you can show I somehow was responsible for the killings, I can see how I could be held liable that way. But even so, if your only claim about my personal responsiblity for it is that I "gave them something of value that helped further their cause", what kind of a standard for liability is that? After all, I'm not the only one who gave them something of value that helped them. Customers of the fake milk business gave them money too. Employees of the fake milk business did too. Those who sold milk to the business did as well. Should the victims be allowed to attack all of their assets as well?

  Paul_Marks:

  I think you're being over-dismissive of the metric "hours to purchase". This measurement is a great way of comparing things across different times and places, and removes all the conceptual difficulties of finding out how much $10 million dollars in 1800 "would be" today.

  Published: May 24, 2006 12:56 PM

• Vince Daliessio

  Person said;

  "I think you're being over-dismissive of the metric "hours to purchase". This measurement is a great way of comparing things across different times and places, and removes all the conceptual difficulties of finding out how much $10 million dollars in 1800 "would be" today."

  This works in only the broadest and most general way, and only in retrospect.

  All value is subjective. Your "hours worked" metric can only apply to one type of worker, an unskilled laborer without tools is ridiculously unproductive compared to a professional or a business owner, and thus cannot be compared across an economy in any kind of meaningful sense.

  Which is why only a free market can decide on an equitable money - no matter how honest or fair, a non-market method for valuing money is flying completely blind, and can never even approximate real values in a real economy.

  Published: May 24, 2006 1:25 PM

• James Turk

  I am compelled to respond because Sean is not accurately stating my point of view about money, and importantly, that I clearly distinguish money from currency. They are different things although Sean is seemingly trying to make them look like one and the same.

  I explain their difference in my book, "The Coming Collapse of the Dollar". More recently I address their difference is a monograph published earlier this year by the Comm. for Monetary Research & Education, "The “Barbarous Relic� - It Is Not What You Think".

  In that monograph I state:

  "It is important to note that money does not really change. Money is the function it performs, so money is still the same thing it always has been from the moment when it first was invented in pre-history.[4] Namely, money is a mental tool used for economic calculation[5] that ingeniously enables each of us to communicate what we value in an exchange. What changes throughout monetary history is currency. It evolves, and the biggest change ever occurred in 1694 [with the formation of the Bank of England]."

  Here are the accompanying notes referenced in the quote above:
  "[4] By its classic definition, money is both a medium of exchange and a store of value. However, this definition better describes currency than money. In its broadest sense, which is how I use the term here, money is simply a means that enables economic calculation.
  [5] See, Ludwig von Mises, Human Action, 4th ed., Irvington-on-Hudson, NY: Foundation for Economic Education (1996), p. 209. Mises describes the “exchange ratios between money and the various goods and services� as the “mental tools of economic planning.� Given that money is the means that enables individuals to communicate their subjective views of value, money itself also is a mental tool. Mises states (p. 177) that “Language is a tool of thinking as it is a tool of social action.� In my view, the same thing can be said about money because, like language, money is a means of communicating."

  Gold is a useful means that enables economic calculation. It does not have to circulate as currency to retain this attribute. Indeed, gold did not circulate as currency through much of the 20th century, but its usefulness in economic calculation was never impeded (though it was distorted at times, for example, during the 1960's when the US gov't dishoarded 10,000 tonnes of gold in a vain attempt to make the market believe that one ounce of gold was worth only thirty-five dollars).

  So contrary to Sean's conclusion, gold is indeed money, and it is today once again being used as currency. It is circulating as digital gold currency through GoldMoney. Hopefully, it's use as currency will continue to grow.

  Sean reads too much into the quote from The New York Times article. He misconstrues why major merchants like Amazon, Travelocity etc. have not started accepting GoldMoney (some smaller merchants do in fact accept GoldMoney). It's not because of any inherent flaw in using gold as currency. Indeed, we received 3 US patents because the digital gold currency we invented is superior to using national currencies as a medium of exchange in online commerce. Instead the decision by the big merchants is simply that GoldMoney does not have the size (i.e., number of accounts -- at least not yet anyway) to attract merchants to get them to update their systems to begin accepting GoldMoney. But of course I would say that, wouldn't I? Well, it will be interesting to see whether I am proven right over time.

  Additionally, Sean seems to misunderstand one characteristic that is fundamental to money's essential nature. He says: "Gold's apotheosis as money would, therefore be marked by a distinct dematerialization of its sacred corpus as it transubstantiated from a hoarded asset to a more trustworthy facilitator of exchange." Strip away the flowery language and he doesn't seem to understand that gold is money because IT IS hoarded. Gold is the only commodity produced for accumulation. All other commodities are produced for consumption. Soybeans, crude oil -- you name it. They are all consumed. Even copper is consumed (i.e., it disappears) in the sense that it is dispersed through millions of applications around the globe; copper is not hoarded.

  As another example, silver's role as money is muddled because part of its demand arises from its consumption in industrial applications. This relatively high industrial demand for silver contrasts markedly with gold, which has very little application in industry. And even where gold is used in industry, much of it gets recycled, to return in some form to gold's available aboveground stock.

  So in summary, I think Sean is somewhat off the mark in this piece, but like his other work, it is a good read nonetheless.

  Lastly, I suppose I should be flattered to be labeled a high priest of gold. While I do in fact sincerely appreciate the recognition Sean gives to me as one who is knowledgeable about gold, the analogy doesn't fit. When analyzing bullion, faith doesn't come into it -- like any practicing Austrian, I only use reason. While the president of the Dallas Fed may rightfully call the dollar "faith-based currency", that description does not work for gold because it is a tangible asset, and not some bank's or govt's promise.
  

  Published: May 24, 2006 2:06 PM

• quasibill

  It seems to me that the "hours worked" metric, rather than being a measure of inflation, is a measure of productivity.

  Inflation is a monetary phenomenon, while productivity is a physical one.

  Inflation is a measure of the loss of value of a given currency (asset) due to increases in supply. In contrast, productivity is a measure of how much value results from the input of a given unit of labor. While the two concepts may be nearly indistinguishable in a complex economy, it is important to realize that they are not the same thing, especially when a state is involved.

  If productivity increases across the board, but money supply remains stable, there will be negative inflation (deflation), but I would guess that a true across the board productivity increase is an extremely rare animal. Rather, productivity increases in fits and starts, with some sectors increasing greatly one quarter, and stagnating the next, while other sectors will be the mirror image.

  Positive inflation, on the other hand, occurs only when supply of a given currency increases beyond the average increase in productivity.

  Defining inflation strictly by measuring productivity allows the money creator to "steal" the value created by increased productivity.

  Published: May 24, 2006 2:09 PM

• George Gaskell

  IF you know IN ADVANCE that this is the sort of enterprise you are dealing with it is your choice whether to do business with them or not. Yes there is a risk that such an enterprise will go bust and the shareholders will drive away in their nice cars to their nice houses (whilst you do not get the money you expected), but that is a risk you CHOOSE to take.

  You are thinking about the limited liability issue in a linear way, Mr. Marks, not an economic way.

  First, when a government creates across-the-board, statutory limited liability for any and all businesses that sign up for it, it destroys the parties' ability to BARGAIN for this measure of risk.

  In the absence of a state-backed statute, parties bargain with one another over the allocation of risk. This is the essential subject of all contract negotiations.

  As a matter of contract, some parties may well decide that one (or both) of them will enjoy limited liability. But that limited liability, in and of itself, has a value. Like everything else, it has different values as each party, and as to each transaction.

  By declaring that all parties have limited liability as a matter of right, the State destroys the value-variations that the allocation of this measure of risk has in the marketplace. This introduces economic inefficiencies.

  Second, not everyone who deals with a business does so as a matter of contract. Torts, for example, are not based on contracts.

  The owners of a business have the greatest level of control over the activities of the enterprise, select managers, and set company policies. They therefore have the ability to greatly affect, over the long term, how likely a company is to cause tortious harm to others. Yet, only in extraordinary circumstances are these people ever subjected to any risk other than the value of their investment. This causes companies to be more likely to engage in risky behavior than they would in the absence of limited liability.

  Either of these points are sufficient grounds for the abolition of statutory limited liability.

  Published: May 24, 2006 2:24 PM

• M E Hoffer

  Mr. Turk,

  I am gladdened that you are about, in these quarters. With that, I'd like to take the Liberty to thank you for your unstinting sharing, of what I believe to be, your fine knowledge.

  With your bravery, stating that which is contra to the Status Quo, sound mind, and open heart, you have literally, and better, figuratively, enriched those with sense enough to pay heed.

  That you have given, unalloyed, of yourself, so freely, should be noted as the action, better than mere words themselves, that proves your literal understanding of von Mises' Human Action.

  Published: May 24, 2006 2:29 PM

• Luke Fitzhugh

  Would those of you who believe in gold as money buy or sell gold today at $650 per ounce, looking both short and long term? What would an austrian economist do today to profit in gold?

  Published: May 24, 2006 2:38 PM

• Person

  Vince and quasibill: You're both reading too much into what I said. I don't intend the "hours to buy" metric as a negation of the subjectivity of values, and I agree it's not a measure of inflation. In my mind, inflation is the gain in money supply, and any deviation is due to productivity changes or supply/demand shifts. It's absolutely criminal to act like inflation is lower because productivity increases. My point was just that "hours to buy" is a useful metric for many purposes.

  George_Gaskell:

  By declaring that all parties have limited liability as a matter of right, the State destroys the value-variations that the allocation of this measure of risk has in the marketplace. This introduces economic inefficiencies.

  The state does not do this "as a matter of right". Creditors are free to require cosigners, collateral, and pledges of investor liability from corporations to their heart's content, and in many cases do. All the state is doing here is setting a default condition from which contracts can deviate merely by adding the relevant provisions. (This is different from bankruptcy law, which makes it so any debtor's promise of certain assets is unenforceable, *irrespective* of what the contract says.)

  Second, not everyone who deals with a business does so as a matter of contract. Torts, for example, are not based on contracts.

  Correct, but like I said above, the law already says you can sue the individuals responsible for their individual tort. If a UPS driver goes berserk, you can sue him individually *and* UPS. The question is whether anyone who does voluntarily interact with a corporation to to its benefit (buying from, supplying to, working for, loaning too, investing in) necessarily places their entire net worth on the line for any criminal act by the corporation's agents. I say no, but feel free to offer your own alterate theory of liability.

  Published: May 24, 2006 2:53 PM

• Don B

  M E Hoffer :

  If there were no human beings on the planet, what would be the value of gold? Answer: ZERO; NOTHING. ZIPPO. If it had intrinsic value,that would not be the case. It is only its utility value to human beings (whether that be aesthetic, industrial, as a medium of exchange, or whatever) that gives it value. It has no value on its own, or in any other context, i.e., it has no "intrinsic" value.

  Published: May 24, 2006 3:46 PM

• George Gaskell

  the law already says you can sue the individuals responsible for their individual tort. If a UPS driver goes berserk, you can sue him individually *and* UPS. The question is whether anyone who does voluntarily interact with a corporation to to its benefit (buying from, supplying to, working for, loaning too, investing in) necessarily places their entire net worth on the line for any criminal act by the corporation's agents. I say no, but feel free to offer your own alterate theory of liability.

  This is wrong is at least a couple of respects.

  First, the significant issue with corporate tort liability does not concern situations in which the proverbial UPS driver goes "berzerk," but when an agent causes harm while nonetheless acting within the scope and course of his employment. In such cases, it is the corporation that is considered to have acted. In such cases, because of special statutory liability protections, modern American law does not allow a tort plaintiff to pierce the corporate veil, except under extremely unusual circumstances. It is presumed that the corporate protection will be maintained, and it almost always is.

  Second, criminal acts are intentional bad acts, and are therefore generally deemed to be outside the scope and course of one's employment, thereby negating the agency relationship.

  In any event, the potential for full liability would cause people to exercise more careful oversight of their agents' activities than under the current limited-liability regime, do you not agree? If so, then ceteris paribus limited liability increases risky behavior.

  Published: May 24, 2006 3:59 PM

• Person

  George_Gaskell:

  First, the significant issue with corporate tort liability does not concern situations in which the proverbial UPS driver goes "berzerk," but when an agent causes harm while nonetheless acting within the scope and course of his employment. In such cases, it is the corporation that is considered to have acted. In such cases, because of special statutory liability protections, modern American law does not allow a tort plaintiff to pierce the corporate veil, except under extremely unusual circumstances. It is presumed that the corporate protection will be maintained, and it almost always is.

  Sorry, but you're just plain wrong on this. You can always sue an individual for an the acts he personally committed, irrespective of whether it's in furtherance of corporations.

  Second, criminal acts are intentional bad acts, and are therefore generally deemed to be outside the scope and course of one's employment, thereby negating the agency relationship.

  There I was using "criminal act" to refer to violations of rights of others by the corporation's agents while acting as such an agent. The context clearly demonstrates this. (Context refers to the words and statemetns surrounding the passage.) Please do not attempt to settle substantive matters ("Should investors be liable for the damages caused by people working in furtherance of a corporation?") by reference to a definition ("Criminal acts aren't part of the corporation!") Regardless, I think you made my point for me. When investing in (or, generally, giving something of value to) a corporation, I assume they will act within the bounds of the law. This is why I shouldn't be liable for my entire net worth because they decide to act illegally in their attempt to profit.

  In any event, the potential for full liability would cause people to exercise more careful oversight of their agents' activities than under the current limited-liability regime, do you not agree?

  I do not agree with your barely-concealed attempt to revert to consequentialist justifications when you think I'm not looking. I do agree that if you saddled people with completely unjustified liability for investing in the wrong firm, they will be more careful about where they invest. Just as I agree that if you saddled a corporation's customers for liability for the corporation's actions, they will be more careful who they buy from. Just as I agree that if you saddled a corporation's suppliers for liability for the corporation's actions, they'd be more careful who they sold to. Just as if you saddled a corporations entire workforce with liability for the corporation's actions, people would be more careful who they work for. Just as if you saddled all people with liability for all corporations' actions, they would demand more regulatory oversight of all corporations. Just as if you saddled everyone within a block of car crash with liability for the full cost of the damage, people would spend more effort making sure cars around them didn't crash.

  What's your point?

  Published: May 24, 2006 4:22 PM

• Peter Wright

  To Mr Corrigan and Mr Turk,

  Given that both the USD (including its derivatives the other currencies) and gold CAN be used as both a medium of exchange and a means of economic calculation is it not true to say that BOTH are money and that they currently compete for ascendancy?

  So if the USD and gold are both money and the USD is faith based then it all reduces to confidence, no? The price trend of gold (adjusted for the FOREX rate of the USD) is a manifestation of the global trend in confidence. A trend that is likely not to be changed easily?

  Published: May 24, 2006 5:04 PM

• M E Hoffer

  Don B,

  Then, given your premise, if there were no human beings on the planet, I'll presume that you'd posit- "nothing has Intrinsic value", or, by extension- "nothing has value."

  This is different than the construct, of Intrinsic/Extrinsic value, that I learned.

  I remain under the impression a good's Intrinsic value is that which can be Empirically proven(to people), and that a good's Extrinsic value is that which is subjectively applied(and added)(by people).

  Published: May 24, 2006 5:13 PM

• George Gaskell

  Sorry, but you're just plain wrong on this. You can always sue an individual for an the acts he personally committed, irrespective of whether it's in furtherance of corporations.

  I never said otherwise. You need to read (and think) more carefully. The issue here is not whether the corporate agent can also be personally liable, but whether the owners of the corporation can, or should, be liable when one of their agents harms others while acting within the scope and course of that agency.

  I do not agree with your barely-concealed attempt to revert to consequentialist justifications when you think I'm not looking. I do agree that if you saddled people with completely unjustified liability for investing in the wrong firm. ... What's your point?

  It is hard to tell when you are looking and when you are not. For example, in this not-at-all concealed argument via a clumsy parade of horribles, you demonstrate that you have failed to grasp the rather rudimentary concept of agency. None of the people who get into traffic accidents within a block of my home are acting as my agent when they drive by. As similar calculus applies to all of your other soft-headed examples.

  In this context (did I use the word right, huh?), the employee of a corporation is the agent of the owner of the corporation. The owner has voluntarily established that agency. The owner has voluntarily accepted the benefits of that agency. Most importantly, the owner CONTROLS the authorized behavior of the agent. Sometimes, that behavior proves to be harmful. Such is the nature of risk.

  But here's the kicker: in every other instance of agency relationships, as they existed before the advent of the statutory corporation, the principal is liable for the acts of his agent, when that agent harms others while acting in the scope and course of that agency.

  It is a simple estoppel idea. One should not be permitted to accept the benefits of an agency relationship, then deny the very foundation of that agency when the costs become inconvenient -- he who controls the harm caused by the agent can prevent the harm he may cause. In contrast, I have no control over the drivers who may get into an accident within a block of my house. Therefore, there is no basis for holding me liable for their actions.

  Published: May 24, 2006 8:36 PM

• Person

  George_Gaskell:

  I never said otherwise. ...

  Yes, yes you most certainly did. Above: "First, the significant issue with corporate tort liability does not concern situations in which the proverbial UPS driver goes "berzerk," but when an agent causes harm while nonetheless acting within the scope and course of his employment. In such cases, it is the corporation that is considered to have acted. In such cases, because of special statutory liability protections, modern American law does not allow a tort plaintiff to pierce the corporate veil, except under extremely unusual circumstances. It is presumed that the corporate protection will be maintained, and it almost always is.".

  The issue here is not whether the corporate agent can also be personally liable, but whether the owners of the corporation can, or should, be liable when one of their agents harms others while acting within the scope and course of that agency.

  Right. Hence my above posts.

  For example, in this not-at-all concealed argument via a clumsy parade of horribles, you demonstrate that you have failed to grasp the rather rudimentary concept of agency. None of the people who get into traffic accidents within a block of my home are acting as my agent when they drive by. As similar calculus applies to all of your other soft-headed examples.

  No, sir, you missed the entire point of that part of my post. You were attempting to shift into consequentialist justifications by talking about how foisting liability on shareholders would make them more careful with their investments. Get it? You were shifting away from the question of "who is genuinely responsible for a wrongful act by corporate agents" into "which assignment of liability would have better consequences". Yes, I know you can come up with some reason why in those other examples, the people weren't "agents" or whatever. I was highlighting your shift away from the matter at hand to consequentialist justifications. Now do you see why I brought up those "soft-headed" examples? (Probably not.)

  In this context (did I use the word right, huh?), the employee of a corporation is the agent of the owner of the corporation. The owner has voluntarily established that agency. The owner has voluntarily accepted the benefits of that agency. Most importantly, the owner CONTROLS the authorized behavior of the agent. Sometimes, that behavior proves to be harmful. Such is the nature of risk.

  No, the "owner" has some measure of control over his behavior. You're forgetting that shareownership is shorthand for a complex set of relationships and responsibilities. You seem to imbue all kinds of meaning into the use of "own" here, to the point that the owner of a capital good is automatically responsible to his full net worth for anything that anyone else ever decides to do with it, with or without his permission.

  But here's the kicker: in every other instance of agency relationships, as they existed before the advent of the statutory corporation, the principal is liable for the acts of his agent, when that agent harms others while acting in the scope and course of that agency.

  Ought, meet is. Yes, I know "that's the way we've always done things". It's totally irrelevant.

  It is a simple estoppel idea. One should not be permitted to accept the benefits of an agency relationship, then deny the very foundation of that agency when the costs become inconvenient -- he who controls the harm caused by the agent can prevent the harm he may cause.

  Sure, and the customers could have decided not to buy there, banks (who often hold the real power) could have called in the loan, etc. Despite your determinism, the employees have free will and could, as a practical matter, do something completely unauthorized or desired. The owners have no control over this.

  In contrast, I have no control over the drivers who may get into an accident within a block of my house. Therefore, there is no basis for holding me liable for their actions.

  Sure you do. You could put up signs reminding them to drive safely. Your HOA could erect barriers of entry. You could put up speedbumps. The point (again, that you missed -- see above) was that there could be tons and tons of really kewl benefits that accrue from saddling specific people with specific liabilities. That would in no sense justify them.

  Published: May 24, 2006 9:39 PM

• samuel m. robbins

  I always find your articles superb intellectual feasts. what I believe you may be unconsciously saying is that gold is not money at these prices, but as the world-wide coming depression unfolds, gold prices will fall back to reality and then become money again. samuel m. robbins
  robbinspc@comcast.net

  Published: May 24, 2006 10:36 PM

• Wild Pegasus

  einzige,

  It's not just you. Corrigan's essays always drown in his desperate attempts to be clever. Whatever points he tries to make get lost in paragraph-long sentences. Once I realised all his speeches and essays were alike, I stopped reading him. If he can't be bothered to write directly and clearly, I'm not going to waste time divining his point.

  - Josh

  Published: May 24, 2006 10:51 PM

• Peter

  Money is the present good most readily accepted in voluntary exchange — accepted without quibble or discount (and, ideally, without compulsion) in final settlement of a trade by a sufficiently large preponderance of economic agents as to be effectively universal.

  Then there is no money. The US dollar is only universally accepted inside the borders of the US, by a small minority of the (world) population. Same with other national currencies. The majority of the world's population (e.g., in India, etc.) are very close to treating gold as money.

  In some ways, it is a symbolic exercise. While the payment system is supported by $100 million worth of gold, no merchants have agreed to take bullion as payment, although Mr. Turk hopes that day may come…

  So GoldMoney is not money. No surprise there. AFAIK, nobody thinks of GoldMoney as other than a storage vault. GoldMoney's list of "merchants" is limited to one company run by a gold bug (RayServers) selling a real product, and a host of people selling investment newsletters. Oh, and Laissez-Faire books, who have, I think, never actually sold a book for gold. E-gold is accepted by several actual merchants (and you can get debit cards, etc., that let you buy stuff from anyone, anywhere - denominated in local fiat units, not gold, however).

  Published: May 25, 2006 5:27 AM

• Peter

  Would those of you who believe in gold as money buy or sell gold today at $650 per ounce, looking both short and long term? What would an austrian economist do today to profit in gold?

  Regardless of whether it's money or not: buy. Unless by "short term" you mean days or weeks, in which case don't: it's too variable to say whether it's a good buy even if you could buy and sell at spot, but since you'll be paying at least 1% over spot for bullion (and several hundred percent for numismatic coins), very short term profit will be very hard to find. It'll be back over $700 in a month or so, though, and I doubt it'll ever be under $700 again...

  Published: May 25, 2006 5:55 AM

• tibuk

  "What Does the High Price of Gold Mean"

  It means inflation is spreading to commodities.

  And it is not over yet. Back in 70's gold reached 700 dollars. Adjusted that number with inflation. It is 2500-3000 dollars. That is the target for gold.

  Published: May 25, 2006 8:41 AM

• George Gaskell

  We have seen this kind of histrionic hyperbole from you before, "person," but you are exceeding even your usual level of frenzied error.

  First, with regard to matter of "piercing the corporate veil," you believe that there is some inconsistency between my two statements on the subject. You are incorrect, again.

  The fact that an agent can be held personally liable for his actions is irrelevant to the issue of whether there ought to ALSO be statutory limited liability for the principal. It is possible for both an agent to be liable AND his principal to be liable as well. The issue here is quite different -- whether there should be some special, statutory limitation of liability, a limitation that the principal enjoys that the agent does not. This issue is separate from how liability may be apportioned between principal and agent.

  You seem to imbue all kinds of meaning into the use of "own" here, to the point that the owner of a capital good is automatically responsible to his full net worth for anything that anyone else ever decides to do with it, with or without his permission.

  A strawman argument?! Please. I have never argued that an owner of any capital good is liable for "anything" that "anyone" decides to do with it.

  I am arguing that some owners have some measure of CONTROL over the behavior of their agents -- people who work for the owner's benefit and at his direction. This is often designed to be part of the employment relationship -- the owner will have the right of control.

  There are other forms of relationships that do not involve that level of control, and they therefore do not constitute an agency relationship. Take leasing of equipment, for example. If A leases Good X to B, and B uses it to cause harm to C, is A liable? Maybe not. A is the owner of the capital good, but under the terms of the lease, A might have no RIGHT OF CONTROL over how B uses it. It also depends on the nature of the actual injury in question, whether the owner had the right to control the particular use of the good that actually caused an injury, even if the right of control did not extend to all possible uses.

  There are some relationships that look an awful lot like agency, but are really arms-length contracts. Many contracts for construction involve hiring laborers to do some portion of the building, like plumbing or electrician work. Is the electrician an employee/agent of the owner of the property? Is he an employee/agent of the builder who, in turn, works for the owner? Answer: it depends. It depends on the RIGHT OF CONTROL that the owner (or the builder) had over the electrician, with regard to the manner in which he was performing the work during with the injury in question occurred.

  With the right to control someone's behavior comes liability for harm that results from that behavior, even if that harm was accidental. The entire realm of negligence liability is based on these types of injuries, which obviously happen every day in every city in the world, very few of which are so extreme as to be properly characterized as someone "going berzerk" or committing a crime. They are merely accidental or unintended harms, but nonetheless sometimes occurring within the scope and course of employment.

  In the context of corporations, the modern State has declared that all owners of corporate stock enjoy automatic, statutory limitation of liability. Courts are not permitted to apply the principles of agency liability, nor can they conclude that an owner had the right of control over his agents and therefore should be liable without limitation. The State has declared that such liability will not be permitted, as long as the owner has filled out the corporate paperwork and gotten the little certificate from the State (the one with the gold-foil seal on it). But this is the usual statist ham-fisted, bureaucratic, formalistic approach. Some corporate owners do, in fact, have the right to exercize control over corporate agents. Some do as a matter of practice. Some have neither, whether as a matter of right nor in practice. But all corporate owners have SOME measure of control, even if it is only over the selection of officers and directors.

  Whether that measure of control is sufficient grounds for liability ought to be examined in each case. But the State has obliterated any consideration of whether that measure of control (whatever it happens to be in any particular case) is sufficient to establish the owner's liability.

  I believe that liability should only exist where an owner, in fact, had the right of control, or where he actually exerted control, and where there is a nexus between that right of control and the harm that actually occurred. But there is no justification I have ever seen for a blanket, across-the-board, artificial, statutory limitation of liability for all corporate owners. None, certainly, that you have advanced.

  Published: May 25, 2006 8:43 AM

• Artisan

  Why long on gold?

  How much is the “intrinsic� gold value at a given time? Nobody knows: you’d have to know where and when interest rate stabilizes (impossible, and since a market move in itself reinforces the price trend, you can’t even measure the evolution of gold as a function over time.)

  I’m not so sure any more that gold is such a good investment today thus, even though it’s a great currency if you consider it to be hardly expandable as compared to paper.
  Conversely, let’s admit gold, due to its limited supply is bound to rise against the inflationary dollar, sure. But how much should it rise?

  Today’s investors - knowing that interest rates are low - borrow dollars and buy gold… so much as to still make a profit on the rising prices (conversely to dollar inflation) minus the 5% interest for instance. Let’s say gold rises 15% a year. That’s 10% left over.

  Once the whole economy goes sick on high prices… interest rates rise again, and make it somewhat more costly to find the speculation money, so investors anticipate, take out the profit and let the gold price drop then. Since it is no accepted currency, you loose.

  When does the gold price rise again then? Once people start to think it’s too low! Not in absolute terms… only relatively to yesterday of course. Influential factors here are the belief that fiat money expands or will expand again… which every libertarian has trouble to abandon in the first place, and you can’t blame them… but, depending when you buy, you may need to be very patient waiting for the next rise (hopefully you don’t NEED the “money� meanwhile!).
  

  Published: May 25, 2006 9:26 AM

• Peter

  Today’s investors - knowing that interest rates are low - borrow dollars and buy gold… so much as to still make a profit on the rising prices (conversely to dollar inflation) minus the 5% interest for instance.

  It's not, strictly speaking, an investment if you just plan on holding the gold. It's just inflation-protection. But you can trade on open2exchange and PVCSE and CyberGoldBank, etc., and make way more than the pathetic lower-than-inflation interest your bank pays. I've been making over 30% per annum on the digital fraction of my gold for two years now - that's actual gain: more gold, not just dollar gains as the gold price rose. (Also, buy shares in mining companies and explorers! They haven't moved much yet, and will go really far!)

  Once the whole economy goes sick on high prices… interest rates rise again, and make it somewhat more costly to find the speculation money, so investors anticipate, take out the profit and let the gold price drop then. Since it is no accepted currency, you loose.

  No you don't. That's called a great buying opportunity! :)

  Published: May 25, 2006 9:58 AM

• Reactionary

  Paul Marks,

  Excellent comments. Thus, in the US, rather than just cut tax rates across the board, we get "daycare spending accounts," "medical spending accounts," IRAs, 401ks, HESPs, and on and on. All designed to enrich money managers who use other people's money to buy stock in companies run by their business school classmates.

  Incidentally, the main (and I think intended) beneficiaries of the US's preferential tax treatment of capital gains are not homeowners, but executives of publicly traded corporations exercising their stock options and liquidating their holdings.

  Published: May 25, 2006 10:37 AM

• Reactionary

  I am pessimistic about precious metals replacing paper and digits as money. I believe it is correct to say that all goods and services are traded against each other, with money serving as the medium of exchange. Paper is as good for this purpose as gold, with gold having the advantage of being impossible to inflate by artificial means. But so long as the rate of inflation remains relatively predictable, I don't see why the game can't continue indefinitely. I'd love to be proven wrong. Is there any modern example of a country returning to the gold standard after a currency crisis?

  Published: May 25, 2006 10:48 AM

• billwald

  "People should be allowed to inherit business enterprises - not be "trust fund kids" who can inherit an income but no control and responsibility."

  Problem arises because parents do not trust their children. Control of the business and assets generally could be transferred long before the parent dies. If I can't trust my kids when I am alive why would I want to give them anything after I am dead?

  Published: May 25, 2006 10:59 AM

• billwald

  "All value is subjective. Your "hours worked" metric can only apply to one type of worker, an unskilled laborer without tools is ridiculously unproductive compared to a professional or a business owner, and thus cannot be compared across an economy in any kind of meaningful sense."

  The output of one man, one shovel in one hour has been generally stable since steel shovels were designed and is generally consistant in all environmets - at least more stable than the price of gold or anything else.

  If mh was adopted as an international standard then assets would be priced in mhs and wages whould be set in multiples of mh for more skilled people and fractions for the neighbor kid who mows your lawn.

  Published: May 25, 2006 11:15 AM

• Don B

  M E Hoffer:

  Correct. It is only human beings who act to achieve values in the quest for existence--from mere existence to flourishing as a human. Nothing else has value unto itself. Without human beings, the earth is just a big, meaningless rock in space. The bears and otters and spotted owls wouldn't care--they don't have the capacity, or need, for values.

  Value is not a primary--it is derivative and dependent on the question: of value to whom?

  If there is no "whom," there is no value.

  I should note to not confuse the philophical idea of intrinsic value with the manner in which it is used with regard to investments, although, even then, it ultimately breaks down to the value that company or investment delivers to some "whom" out there; without them, the investment has no value, "intrinsic" or otherwise.

  Published: May 25, 2006 11:47 AM

• Paul Marks

  "Person" says that hours of work are a good way of comparing prices over history - not really, as wages have gone up (in real terms) by a vast amount over the last couple of centuries (indeed since the very industrial revoultion that Karl Marx argued would make wages fall).

  However, saying that such and such a product now costs far few labour hours than it did (for someone on average wages) at least points to the vast increase in income that there has been (which, I admit, is worth doing).

  billwald says that someone could give a business to his children while his still alive - are there not "gift taxes" (or some form of income tax) in the United States?

  And why should someone hand over assets while they are still alive anyway? It should be their choice - and if the children are wasters, then do not give it them at all. Give the money to charity, or (if you wish) give it to the people who work there (as John Lewis did with his department stores - hence the John Lewis partnership). It should be up to the owner what he does with his or her property.

  A death tax system is perfect for people like Warren Buffet - he comes along to a family enterprise and says "my corporation will buy your enterprise, you can stay on as manager and your children will get income from a trust fund".

  So wonder W.B. is so in favour of bringing back the death tax.

  Also there is the matter of caring for estates over time. Many people are often critical of greed - of seeing land or an enterprise as just a source of money (being treated as not having any non economic value).

  Certainly some familes neglect their estates (a month ago I visited Houghton Hall in Lancashire England - where two hundred years ago the family lost most of their estates on a single turn of a card), but most families take great care of what has been handed down - and they develop it (they do not see just as a source of money).

  Of course in a complex world there is a need for both the "new man" who rises up from poverty by single minded determination to make money, and for traditional familes who preserve what might be called the "cultural capital" (although the word "capital" is misleading here) of a society.

  In terms of business. I rather prefer the German way (where familes dominate most manufacturing enterprises - although this is under threat now with changes in tax law) to the British and American way where hired managers control things - people only concerned with pleasing the pension fund (and other financial institution) hired managers - so they get their end of year bonus (in cash or stock options). Tax law and regulations favour the system by which financial institutions (not individuals) own most stock - basically hired managers in control of other hired managers (and all sitting on each others pay review bodies).

  A good manufacturing enterprise takes a long time to develop - not the attitude of someone who is only concerned with what the stock price will be at the end of the year. It depends in large part in having a real pride in the products that the enterprise produces. Certainly economic value is subjective (it is simply what a customer thinks something is worth - and he will pay a price less than or equal to the price he thinks it is worth), but economic value is not the only form of value.

  And, in the end, an enterprise that does not care about the quality of its products "we only care about making money round here", will find that it stops making money. Conning morons may be a good way to short term gains - but it does not build a good long term enterprise.

  It is no accident that most developments in a business (in the United States or Britain) tend to occur before it comes under the control of the pension funds and other financial institutions.

  It is partly diseconomies of scale (as a business gets very big it often becomes hard to manage and loses its way), but it is not just that. A business without real owners (and owners who care about the products) tends to drift away from what it should be doing.

  Published: May 25, 2006 11:56 AM

• Person

  George_Gaskell:

  But there is no justification I have ever seen for a blanket, across-the-board, artificial, statutory limitation of liability for all corporate owners.

  There is no such blanket liability. For the specific actions that individuals who are also shareholders commit, you can always sue them. If all they did was advance money and help pick managers, I see no reason why they should be liable to their full net worth.

  None, certainly, that you have advanced.

  Yes, that I have advanced, several times, against your forgetfulness. An individual does not put his entire net worth on the line merely for contributing capital. To say otherwise would imply the full liability of everyone who has given anything of value to the corporation. To your ought-is argument about control, I have said again and again, that banks, customers, workers, and suppliers also weild sigificant power over what they corporation does. But nevertheless, you still think that by buying $2000 of equity in a milk business, I necessarily owe my full net worth if that business ever engages in contract killings. To that, you have given no justification.

  Paul_Marks:

  Did you read what I wrote? I'm not talking about how many hours a worker works per week. I'm talking about how many hours of work it takes to buy something. This is useful information because it has meaning in any time period.

  Published: May 25, 2006 12:22 PM

• George Gaskell

  I see no reason why they should be liable to their full net worth

  Everyone is liable "to his full net worth" for every harmful act he commits, and further vicariously liable for the acts of his agents (when those acts are in the scope and course of the agency), except shareholders. All you have offered in support of this peculiar, special treatment is hyperbole, awful alternatives, and other logical fallacies. Like this straw man:

  But nevertheless, you still think that by buying $2000 of equity in a milk business, I necessarily owe my full net worth if that business ever engages in contract killings.

  I can't tell if you are trying to be funny or you have a serious reading comprehension problem.

  Published: May 25, 2006 1:04 PM

• Curt Howland

  On eliminating "limited liability corporations"... the argument against doing so seems to be that no one will invest if they are personally liable for the actions of that corporation.
  

  Well, then don't buy the company itself.
  

  Buy shares of the stock being produced/moved by that company. The company then gives you back that portion of the profits that your share produced, or something to that effect.
  

  I agree that this is a limited view, but simply repealing the laws themselves and letter people create answers that accomplish the same thing is the real goal. I have no pleasure in eliminating enterprises, just in repealing the laws that distort peoples actions.

  Published: May 25, 2006 2:05 PM

• Person

  George_Gaskell:

  Everyone is liable "to his full net worth" for every harmful act he commits, and further vicariously liable for the acts of his agents (when those acts are in the scope and course of the agency), except shareholders.

  No, unless you change the meanings of words between the situations. If I ask a plumber to fix my toilet, it's his fault if he causes a leak, not mine.

  All you have offered in support of this peculiar, special treatment is hyperbole, awful alternatives, and other logical fallacies.

  No, I haven't.

  Like this straw man:

  "But nevertheless, you still think that by buying $2000 of equity in a milk business, I necessarily owe my full net worth if that business ever engages in contract killings."

  I can't tell if you are trying to be funny or you have a serious reading comprehension problem.

  Nor can I tell if you are trying to be funny or have a serious reading comprehension problem. The supposition I gave follows directly from the statements you made here. You refuse to answer because it would hurt your case. (I use that term loosely.)

  
  

  Published: May 26, 2006 8:01 AM

• George Gaskell

  If I ask a plumber to fix my toilet, it's his fault if he causes a leak, not mine.

  Your plumber is not your agent.

  If, instead, you hired this plumber to fix someone else's toilet, and he botched the job, then, from the perspective of the person who was thereby harmed, the plumber would be your agent, and you would be liable for the harm he caused.

  The supposition I gave follows directly from the statements you made here.

  No, it does not. I specifically mentioned, several times, that the commission of a crime is presumed to be outside the agency relationship. ("Second, criminal acts are intentional bad acts, and are therefore generally deemed to be outside the scope and course of one's employment, thereby negating the agency relationship." Posted by George Gaskell at May 24, 2006 03:59 PM)

  Thus, your hysterical "supposition" that shareholders are automatically liable for contract killings committed by corporate officers is indicative of your difficulty understanding the English language.

  (Incidentally, if a crime is, in fact, part of the agency relationship, it's called a "criminal conspiracy" and constitutes a whole different kettle of fish.)

  Published: May 26, 2006 8:20 AM

• Person

  George_Gaskell:

  Your plumber is not your agent.

  Yes, yes he is, if the term "agent" is to have any meaning whatsoever. If someone I pay money to in exchange for performing a task is not my agent, who is? Note how you are forced to make odd distinctions about how someone's agency depends on whether he operates on my property or someone else's (or whatever ad hoc distinction you just came up w ith to salvage your position).

  No, it does not. I specifically mentioned, several times, that the commission of a crime is presumed to be outside the agency relationship.

  No, you defined away the problem by taking the term I used and assering your meaning such that my comment would be irrelevant. Everyone can scroll up and re-read that exchange. My point was that in giving the managers the capital goods, I place the condition that they not violate others' rights in the operation of the business. Insofar as they do, they're doing it without my permission. So again, if you want to show specifically that in some board meeting I said, "hey y'all, why don't you kidnap some kids", I totally agree that would make me morally responsible and thus liable. But that's not inherent in share ownership. If you're going to concede that shareholders hold no person liability for "criminal acts", then you agree with me. A tort will almost always be in some way a "criminal act" and thus unauthorized.

  (Incidentally, if a crime is, in fact, part of the agency relationship, it's called a "criminal conspiracy" and constitutes a whole different kettle of fish.)

  Cute. I used to talk like that ... until I left the farm.

  Published: May 26, 2006 8:42 AM

• George Gaskell

  If someone I pay money to in exchange for performing a task is not my agent, who is?

  The paying of the money and the performance of the task is not what, in itself, makes someone an agent.

  When you hire a plumber to fix your own toilet, there are only two parties -- you and him. This is simply a contractual relationship.

  Agency, in contrast, involves at least 3 parties: the principal, the agent and the third party. The first person desires to perform some act, but rather than doing it himself, he performs it through a second person. When those acts affect the life, liberty or property of a THIRD party, then the issue of agency arises. Until the third party enters the picture, there is no such thing as an agency. That is why I said that "from the perspective of the person who was thereby harmed [i.e., the third-party], the plumber would be your agent, and you would be liable for the harm he caused." (Posted by George Gaskell at May 26, 2006 08:20 AM)

  A tort will almost always be in some way a "criminal act" and thus unauthorized.

  This is wrong. While intentional torts do exist, of course, there are many tortious acts that are not remotely equivalent to the commission of a crime, which requires, obviously, some degree of criminal intent.

  That is why I said this: "With the right to control someone's behavior comes liability for harm that results from that behavior, even if that harm was accidental. The entire realm of negligence liability is based on these types of injuries, which obviously happen every day in every city in the world, very few of which are so extreme as to be properly characterized as someone "going berzerk" or committing a crime. They are merely accidental or unintended harms, but nonetheless sometimes occurring within the scope and course of employment." (Posted by George Gaskell at May 25, 2006 08:43 AM)

  Published: May 26, 2006 9:27 AM

• Paul Marks

  To Person.

  No I did not read all of what you wrote - I apologize.

  I am very wary of the concept of "labour hours" because someone come along (like Marx or Ricardo or Smith in SOME of his writings)and try and use them a way to measure economic value (which is a terrible mistake)- but, I admit, that is like someone saying "I am against axes because someone might use one to chop my head of". Axes do have other uses.

  On your argument about corporations:

  As many have said, if something is known up front and is voluntary then it should not be criminal.

  So yes I you buy 20 Dollars worth of shares in a company you should not be liable for its debts - IF everyone know it was we British call a "limited liability" company or what you call an "incorporated" company up front (before they decided to do business with it).

  And this goes back well before the various limited liability statutes of the 19th century.

  If a person says "I will only do business with an unlimited liability concern" that is fair enough - it means that he will buy his insurance from an old style Lloyds syndicate (where all the "Names" assets are put on the line) and so forth.

  But one should not say "limited liability should be banned" - so that a voluntary agreement to do business this way is simply not allowed.

  Of coure this does not mean that all the subsides, advantges in tax law, and warped regualtions should not be got rid of - of course they should (I am not a pro corporate welfare person).

  I wonder where this hatred for corporations among libertarians is comming from.

  Perhaps it is because we (and I include myself) do not fit very well in a corporate structure (especially in the way they have evolved - influnced by taxes like Capital Gains Tax hitting individuals and regulations like the 1967 Williams Act and the whole S.E.C. enity protecting corporate managers).

  But it is a mistake to declare war on the whole concept of limited liability - such concepts have been in use for a very long time indeed. How else can people finance a risky venture?

  "We will all put X amount of money in the pot"

  "No - you are putting everything you have got in the pot, because you are liable for all debts if the enterprise fails".

  "Well we had better not try to achieve this project then".

  Would this apply to colleges, churches and trusts as well?

  Perhaps it is the opposition to fractional reserve banks (and other credit money expanding financial institutions) that is at the bottem of this.

  I agree that any effort to increase the amount of money lent out so that it is greater that the amount of money saved (via the various book keeping tricks) is a terrible thing to do - leading to the boom-bust cycle.

  But why not just say - "you have to have money before you can lend it out, and once you have lent it out you do not have the money any more - untill when and if it is paid back".

  One does not need to also say "corporate enterprises are banned".

  And, of course, just getting rid of the 19th century limited liability statutes would not get rid of limited liability enterprises.

  Published: May 26, 2006 9:59 AM

• Andy Bacon

  If the Mises Institute really does want to promote liberty and Austrian economics then it should select Daily Articles that are less esoteric.

  
  Do some of the writers have an automatic thesaurus so as to select the most obscure word possible and why do they make a simple statement so complicated and almost unreadable?
  
  It seems to me some are more interested in showing off how clever they are than the message.

  
  I am a graduate engineer, I am not thick .The endless use of language I do not understand and references to Greek mythology and similar ancient history get on my nerves. You will end up only preaching to the converted if that is not already the case .
  
  My secretary, a highly intelligent lady, cannot be bothered to read the articles because of the above.

  
  As an example I cite: What Does the High Price of Gold Mean? by Sean Corrigan.
  
  I generally do like his articles and he is clearly in the genius category but why is it necessary to use the word ineluctable? What important nuance does it convey over the word inevitable? I have never come across that word before. Similarly extirpate instead of eliminate, milieu/environment cavil/quibble, corsairs/pirates, polity/state, transubstantiate/changed suzerains/rulers verities/truths etc.
  
  The third paragraph was:
  
  "As a result, the period was not unblemished by periods of wild, speculative excess and interposed monetary panic, the most spectacular instances of which were the two, partly interrelated schemes whose respective Mississippi and South Sea Companies served to give us the word "bubble" itself."

  
  What is the difference between not unblemished and blemished? What does the paragraph convey that the following does not?

  
  As a result, the period was blemished by cycles of wild speculative excess and monetary panic, the most spectacular instances of which were the two, partly related schemes of Mississippi and South Sea Companies that served to give us the word "bubble" itself.

  
  Then we read:

  
  "Gold's apotheosis as money would, therefore be marked by a distinct dematerialization of its sacred corpus as it transubstantiated from a hoarded asset to a more trustworthy facilitator of exchange."

  
  I rest my case.

  
  Maybe I am exposing my own asininity -see even I have a thesaurus- but so what, most of my friends would simply tell Mr Corrigan to get his head out of his arse.

  Published: May 26, 2006 10:29 AM

• M E Hoffer

  Andy,

  As you obviously know, language is a powerful frame for the transmission of ideas. Words, and their specific choice, convey much. Whether this author, in this piece, succeeds in what he set out to accomplish, is a fine Q. I suggest he is least signalling his contempt for "AP Style". Also, keep in mind that language structure can be useful as a shibboleth.

  Your Q: "Whether this should be a "Daily Article"?", is a good one. I'm not sure what the intended purpose of that e|mail-string is, but in light of your comment, it should definitely be reconsidered.

  It could be the author was trying to bolster, with his style, as well as with his words, the following premise: "It is with horror that we now witness the maturation of the fruits of the policy that results from this abdication of the intellect."

  Published: May 26, 2006 12:12 PM

• Paul Marks

  Sometimes technical language has to be used. However, yes, if there are two words that do the same job the less difficult (for the reader) one should be used.

  Perhaps we could all gain by having a look at how Henry Hazlitt used the English language to explain economic and political matters.

  Before anyone says "pot calling kettle black" - yes my own writings are often much worse than anything above.

  Published: May 27, 2006 6:07 AM

• Brent Nelson

  Gold would have more application in industry if it wasn't so expensive. [James Turk contrasted the industrial consumption of silver to the lack of application of gold]. Isn't that just the paradox of commodity money? The more use it sees as money, the fewer uses there appear to be for it as a commodity. In truth, there are merely fewer profitable uses for it as a commodity.

  Published: May 27, 2006 11:09 AM

• Paul Edwards

  James,

  “Indeed, we received 3 US patents because the digital gold currency we invented is superior to using national currencies as a medium of exchange in online commerce.�

  It is not 3 US patents that could ever show that the currency you “invented� is superior to national currencies as a medium of exchange, but rather it is the market that decides this. And the US market says that the dollar is the currency and medium of exchange and unit of economic calculation.

  Seriously, do you not think it is relevant that almost all US commerce is done in and reckoned in terms of the USD? Let’s make a list of things we buy. Tell me which ones you think people buy and sell in terms of gold ounces:

  Groceries
  Gas
  Houses
  Cars
  Oil
  Clothing
  Toys
  Drugs
  Soap
  Cosmetics
  Vacations
  Securities
  Tools

  Of that small list, I pay for them all and everything else with dollars. So does almost everybody else. How much is a gallon of gas about? $3.00. No in terms of gold? Hmmm, have to calculate that …. So what does that say: it is the dollar that is the US:

  Currency
  Media of exchange
  Money
  Unit of calculation

  Gold is what people hoard to try to avoid the ravages of inflation. It would be great if it were money. It’s not.

  Published: May 27, 2006 1:41 PM

• David White

  Paul,

  To modify your statement somewhat:

  Gold is what people SAVE to try to avoid the ravages of an increasingly worthless fiat currency. As the money of last resort, gold will reassert itself as currency -- the current form of money -- when the dollar goes the way of all fiat: into oblivion.

  Published: May 27, 2006 4:51 PM

• M E Hoffer

  Paul,

  Even the recently departed head of the FedRes, Alan Greenspan, does not consider the U$D/FRN to be "money". As a matter of fact, he is on record admitting that: even he cannot define the "dollar", as we know of it today.

  The "dollar" is hardly money, it is a currency and a unit of account, at best. Gold, on the other hand, has only been "de-monetized" in the sense that the link between it and the prevailing Fiat(of all stripes) has been repudiated, and, thereby, is less often used as a currency.

  Published: May 27, 2006 5:04 PM

• Paul Edwards

  David,

  “Gold is what people SAVE to try to avoid the ravages of an increasingly worthless fiat currency.�

  I didn’t mean the term “hoard� in a bad way. I equate it with the term “hold�, as in keeping it on hand in one’s pocket or in one’s safe. I equate savings to investment which means buying capital goods and paying wages and rent to produce consumer and producers goods which results in higher production and more wealth.

  “As the money of last resort, gold will reassert itself as currency -- the current form of money -- when the dollar goes the way of all fiat: into oblivion.�

  The regression theorem shows us that for gold to reassert itself as money through market forces, it must do so through the painful process of emerging as the most marketable commodity in a barter economy. You cannot patent the process and you cannot advocate it into existence. I, for one am not looking forward to the chaos that is implied in having our economy sent back into the Stone Age of barter before gold can once again emerge naturally. Things will be much worse than they are now before they get better through that process.

  M.E.,

  “Even the recently departed head of the FedRes, Alan Greenspan, does not consider the U$D/FRN to be "money". As a matter of fact, he is on record admitting that: even he cannot define the "dollar", as we know of it today.�

  I’m not saying that Greenspan can utter nothing but lies and incoherent babble, but the last time I saw evidence that he was capable of anything else was in an article he wrote on gold in 1966.

  If I wanted to be confused about money and gold, I would pay closer attention to what the ex-chairman of one of the most prominent criminal organizations of the twentieth century has to say about it.

  “The "dollar" is hardly money, it is a currency and a unit of account, at best. Gold, on the other hand, has only been "de-monetized" in the sense that the link between it and the prevailing Fiat(of all stripes) has been repudiated, and, thereby, is less often used as a currency.�

  I was as disappointed as anyone to realize that gold is simply not money any longer, but we must get over it. It is an emotional thing for an Austrian, but take some slow breaths and then reflect. You don’t get paid in terms of gold, you don’t buy anything denominated in gold, you don’t say the price of the dollar is 1/700 th an ounce of gold. Every single price you have dealt in or are ever likely to deal in will be in terms of the dollar if you’re American, and some other fiat paper currency (money) of some other nation. This is not rocket science, what the prices are marked in gives you a big clue to just what is money. These days, gold is not money.

  Now I agree: The only thing that can be justified as money is a market selected commodity money such as gold. All fiat paper money is unjustified and fraudulent. However, what is and what is justified are often not the same, and this is the case here for our money. I still hold that one of Rothbard’s suggested methods of getting the dollar back to gold is feasible and worth while. However, this method involves cooperation from the fed itself before it is disbanded. Unlikely, yes. But at least it is possible and doesn’t demand sending our economies to the Stone Age first.
  

  Published: May 27, 2006 6:09 PM

• James Turk

  To Paul Edwards

  If our economy gets sent to the Stone Age, it won't be as a result of market forces. It will be the result of government actions, first by debasing the currency and then continuing to force the debased currency to remain in circulation, following the model so clearly explained in Andrew Dickson White’s “Fiat Inflation in France�. A more recent example would be the peso crisis in Argentina.

  When left unfettered the market will find its own solution to today’s problems of debased currency and legal tender laws. I suggest that GoldMoney is already proving to be one possible solution. Though admittedly its influence is small at this time, if we maintain our growth rate and achieve the goals that we envision, we could have a meaningful impact in five years time, perhaps less if the problems with the dollar worsen quickly.

  The digital gold currency offered by GoldMoney is completely voluntary. If people find GoldMoney useful, they will use it and pay us a fee, enabling us to make a profit and remain in business. Central bankers force their fiat currency into circulation and remain in business regardless how well or poorly they do managing their currency (and their track record shows they do a poor job in maintaining the purchasing power of that currency). Central banks are not driven by market forces or bottom-line profits; they are driven by politics and their own self-interest to maintain their privileged cartel position. For this and other reasons presented in my recent monograph, “The Barbarous Relic – It Is Not What You Think� (published by the Comm. For Monetary Research & Education), I explain why central banks are the barbarous relic, not gold.

  You seem to be wedded to the view that gold is not money and that only the dollar is money. For this reason I guess you favor Rothbard’s suggestion of how to get the dollar back to gold. What I am suggesting is something that I think will prove more useful – getting people back to gold and forgetting about trying to change the dollar. That’s what GoldMoney accomplishes. It does not intend to replace the dollar and other national currencies, but to supplement them by giving market participants another currency choice. GoldMoney is a non-national currency, and we operate from Jersey, Channel Islands (which is viewed to be politically neutral around the world) for a reason. We believe that currency should be a neutral tool in commerce, not subject to political control, and Jersey enables us to achieve that objective.

  It is a quixotic exercise I think to expect that the State will restore the dollar to its sound money origins. Thus, we should not be fixated on the dollar nor hope for or expect a solution. We should instead be taking steps that improve our individual situation, and less reliance on State-run currency that is being continually debased is one way to do that. So when US government action eventually puts the economy in the Stone Age by forcing its debased currency to remain in circulation, farsighted individuals who have taken steps to protect themselves can live more or less to the standard which they have become accustomed, using GoldMoney as a means for interaction with others in the marketplace.

  I’d like to make one last point on the chance that you may find it helpful. It’s concerning your list of things that can be purchased with gold.

  My wife and I have been discussing (for a few years actually) replacing her SUV (now 12-years old) when price of SUVs came down. I've been saying that we should wait and only buy when the price of the SUV she wanted to purchase fell to 2,000 goldgrams. I've been saying this since the price was 4,000 goldgrams. Fortunately, she has been patient, so we waited. But the week before last when gold climbed to $716 ($23.02/gg), she exchanged 2,000 goldgrams for $46,000 which she used to buy a new SUV. In dollar terms, the price of gold doubled. But when measured in gold terms, she bought her SUV at half the price from a few years ago.

  Now you might say that this example makes your point, that the dollar is money. But my point is that she is operating in the gold economy, and bought her car in the dollar economy. What she did was no different than if she was traveling to Japan and exchanged her gold currency to operate in the yen economy, of if some dollar-based American travelled to Europe and exchanged their dollar currency to operate in the euro economy.

  Again, admittedly, the gold economy is small, but it is growing. And people in it are increasingly using gold as currency, i.e., as means of payment. But more to the point, it proves that gold is money, even by your definition.

  Published: May 28, 2006 12:45 PM

• David White

  Paul,

  Far be it for me to add anything to what Mr. Turk has said, so let me instead quote the former Fed chairman in his 1999 testimony before Congress: "Gold still represents the ultimate form of payment in the world. Fiat money, in extremis, is accepted by nobody. Gold is always accepted."

  If that doesn't make it money, I don't know what does, which is why I "hoard" as much of it as I can, awaiting the day when gold returns to its rightful place in human affairs.

  Published: May 28, 2006 1:53 PM

• Paul Edwards

  James,

  “If our economy gets sent to the Stone Age, it won't be as a result of market forces. It will be the result of government actions, first by debasing the currency and then continuing to force the debased currency to remain in circulation, following the model so clearly explained in Andrew Dickson White’s “Fiat Inflation in France�. A more recent example would be the peso crisis in Argentina.�

  I agree.

  “When left unfettered the market will find its own solution to today’s problems of debased currency and legal tender laws. I suggest that GoldMoney is already proving to be one possible solution. Though admittedly its influence is small at this time, if we maintain our growth rate and achieve the goals that we envision, we could have a meaningful impact in five years time, perhaps less if the problems with the dollar worsen quickly.�

  I don’t like to throw cold water on ideas of people with good intentions; it is just that the implication of the regression theorem is very plain: gold emerged as money through the barter market, gold money substitutes (redeemable gold certificates) became highly marketable, the banks and the fed then removed the gold basis of these certificates and renamed them federal reserve notes. Now people consider paper dollars money. Today, most of them have no idea that gold would make a better money than paper, some fear it wouldn’t, and many would have no idea what we are debating here. As far as the market is concerned there is no barter, there is money already: the dollar. For gold to emerge now is not a matter of a successful marketing approach. It must emerge from the chaos of barter.

  “The digital gold currency offered by GoldMoney is completely voluntary. If people find GoldMoney useful, they will use it and pay us a fee, enabling us to make a profit and remain in business. Central bankers force their fiat currency into circulation and remain in business regardless how well or poorly they do managing their currency (and their track record shows they do a poor job in maintaining the purchasing power of that currency). Central banks are not driven by market forces or bottom-line profits; they are driven by politics and their own self-interest to maintain their privileged cartel position. For this and other reasons presented in my recent monograph, “The Barbarous Relic – It Is Not What You Think� (published by the Comm. For Monetary Research & Education), I explain why central banks are the barbarous relic, not gold.�

  I agree with the general thrust of your position. However the small, but very important point on which our assumptions differ is this: that given the current popularity and familiarity with FRNs, that there is a possibility for wide-spread adoption of GoldMoney. This is not because GoldMoney is not a great idea. It is because for it to succeed, the gold commodity would already have to be money. People would have to say something like this: “Hey, I’m using gold as money anyways, why not use GoldMoney as a money substitute! It’s even better because it’s more convenient!�

  “You seem to be wedded to the view that gold is not money and that only the dollar is money. For this reason I guess you favor Rothbard’s suggestion of how to get the dollar back to gold. What I am suggesting is something that I think will prove more useful – getting people back to gold and forgetting about trying to change the dollar. That’s what GoldMoney accomplishes…�

  LOL. Well, I’m not really at all advocating the paper dollar as money, as much as just making what I would call the obvious observation that it in fact is money. The corollary to that is, of course that gold is not money. I favor Rothbard’s position because I agree with him that after 100 years of using FRN’s and 70 years with them not even being redeemable in gold that people are not going to switch to some other form of money when this one is so utterly in widespread use and marketable. The masses have absolutely no idea of how or why your GoldMoney could be better than the dollar, and they are not about to invest the time and effort in learning why it is the case. The market operates with or without the participants’ formal understanding of the foundational principles of money. It does not depend on this understanding; a switch to GoldMoney would require just such an understanding as a minimum; I have no faith that this could ever happen.

  “…It does not intend to replace the dollar and other national currencies, but to supplement them by giving market participants another currency choice. GoldMoney is a non-national currency, and we operate from Jersey, Channel Islands (which is viewed to be politically neutral around the world) for a reason. We believe that currency should be a neutral tool in commerce, not subject to political control, and Jersey enables us to achieve that objective.�

  And this is a fatal misunderstanding of the nature of money in a free market. Only in the very early stages of the development of money on the fringes of barter, can another commodity have a hope of challenging the first for the purpose of indirect exchange. Once a commodity (or its substitute turned fiat) achieves mass acceptance as money, the market has decided. The dollar holds this position. GoldMoney cannot offer another choice. Money is naturally the exclusive single most marketable commodity. Two moneys won’t exist side by side.

  “It is a quixotic exercise I think to expect that the State will restore the dollar to its sound money origins. Thus, we should not be fixated on the dollar nor hope for or expect a solution. We should instead be taking steps that improve our individual situation, and less reliance on State-run currency that is being continually debased is one way to do that. So when US government action eventually puts the economy in the Stone Age by forcing its debased currency to remain in circulation, farsighted individuals who have taken steps to protect themselves can live more or less to the standard which they have become accustomed, using GoldMoney as a means for interaction with others in the marketplace.�

  Yes, perhaps you are right about the state. But I still think I’m right about money.

  “I’d like to make one last point on the chance that you may find it helpful. It’s concerning your list of things that can be purchased with gold.
  “My wife and I have been discussing (for a few years actually) replacing her SUV (now 12-years old) when price of SUVs came down. I've been saying that we should wait and only buy when the price of the SUV she wanted to purchase fell to 2,000 goldgrams. I've been saying this since the price was 4,000 goldgrams. Fortunately, she has been patient, so we waited. But the week before last when gold climbed to $716 ($23.02/gg), she exchanged 2,000 goldgrams for $46,000 which she used to buy a new SUV. In dollar terms, the price of gold doubled. But when measured in gold terms, she bought her SUV at half the price from a few years ago.

  “Now you might say that this example makes your point, that the dollar is money. But my point is that she is operating in the gold economy, and bought her car in the dollar economy. What she did was no different than if she was traveling to Japan and exchanged her gold currency to operate in the yen economy, of if some dollar-based American travelled to Europe and exchanged their dollar currency to operate in the euro economy.�

  I think that is very cool and very smart. I really hate to even dispute you on this issue when I’m this impressed with what you are trying to achieve. Unfortunately, you are correct that your example does make my point. However, it just seems like a really smart way to go for the individual savvy enough to see the angle. So my hat is off to you.
  
  “Again, admittedly, the gold economy is small, but it is growing. And people in it are increasingly using gold as currency, i.e., as means of payment. But more to the point, it proves that gold is money, even by your definition.�

  By my definition? James, gold will by money by my definition when cabbage prices are marked in Safeway in terms of gold weight. I have to say though, if you are right and i am wrong, i will not be disappointed.
  

  Published: May 28, 2006 2:22 PM

• Paul Edwards

  David,

  Everybody (I exaggerate for the sake of humor) is quoting Greenspan to make the point that gold is money. I don’t mean to be disrespectful to those quoting him when I say that I think this is funny and ironic. There is always the chance that what Greenspan says is actually correct and true. I just don’t think it is necessarily very likely.

  In any event, let us recognize what the entire purpose of the fed has been: to give weight to the argument that gold is a bad money, that the use of a gold standard leads to an instable economy, fraught with recessions and depressions due to the investing man’s psychological instability. The pretext of the fed is that central management of the economy keeps it on an even keel, that without the fiat money of the fed, that gold would have us jumping from the frying pan to the fire on a regular basis.

  I do not dispute that gold is the ultimate commodity most suited for monetary purposes. I agree that in free barter markets, it has in the past and would again emerge as the natural commodity money. I agree that some people hold it because of this fact even today. All I’m saying is, we all buy our groceries with dollars, not gold ounces, and that furthermore this is highly unlikely to change without cooperation from the fed itself. The basis on which I conclude this is the regression theorem. Once a money is established, even if it has been completely converted to fiat, the people are comfortable with it and will stick with it, come hell or high water. And if, as in Germany of the 1920’s, they destroy their mark, they will adopt the currency of another nation, or they will create a new mark based on the old one. They will not and cannot jump to gold by instinct or by formal reasoning, as this is not how commodity money emerges.
  

  Published: May 28, 2006 2:51 PM

• David White

  Paul,

  I buy my groceries with dollars for the same reason that I pay my taxes with them: the state gives me no choice. And come hell or high water (both of which ARE coming), the people, being utterly clueless, will do as they're told, until their overlords see that it's time to pack their bags (with gold) and bid the people a disdainful adieu.

  As for the dollar, as the world's reserve currency, it cannot implode without all other fiat currencies imploding. And since it is inevitable that the dollar WILL implode, what can one conclude other than that gold must reassert itself?

  And forget barter, as digital currencies like GoldMoney are already here and are simply waiting in the wings to put gold back in its rightful place, only much more securely and robustly.

  That said (and with all due respect), I think it's you who needs to take a deep breath and accept the fact that we stand on the threshold of a new era, one in which the state as we know it will pass into history and humankind will embark on a long-delayed journey of discovery.

  Yes, the transition will be chaotic, but better that than the continuing chaos of the state. I mean, can you honestly look at the world today and not see that this insantiy cannot continue? Do you not see that the Internet is changing everything -- http://www.lewrockwell.com/orig/garris3.html -- and that as our money is returned to us, so will our freedoms be?

  Cheer up, buckle down, and buy gold.

  Published: May 28, 2006 4:16 PM

• M E Hoffer

  Paul,

  With this: "There is always the chance that what Greenspan says is actually correct and true." I suggest that read his statements, as FedRes head, from the following point of view: he works for the Federal Reserve, a private corporation, not the USGov, or the people of the u. S. of A..

  I found, from that POV, much of what was chalked up to "Greenspeak", became emanately clearer.

  As far as your belief that two "moneys" cannot concurrently circulate, I'd suggest you'd find many instances over time, including today, where that was exactly, at least, the case.

  Published: May 28, 2006 6:00 PM

• Paul Edwards

  David,

  This is one of my favorite topics, so I just can’t shut up on it…

  “I buy my groceries with dollars for the same reason that I pay my taxes with them: the state gives me no choice. And come hell or high water (both of which ARE coming), the people, being utterly clueless, will do as they're told, until their overlords see that it's time to pack their bags (with gold) and bid the people a disdainful adieu.�

  Not really. Most people have no idea they are under compulsion to use the dollar. They just do and would freak out at the suggestion they accept payment in any other form than what they presently take it in, which is dollars in the US.

  “As for the dollar, as the world's reserve currency, it cannot implode without all other fiat currencies imploding. And since it is inevitable that the dollar WILL implode, what can one conclude other than that gold must reassert itself?�

  But when a currency implodes, what has happened historically? The German mark imploded. A new mark was created at some fixed ratio to it. Gold did not reassert itself. When you state that gold will reassert itself, keep in mind the regression theorem and how it connects to this. Gold must either be explicitly re-tied to the dollar by those who broke it away from the dollar in the first place, or gold must emerge from barter all over again. The latter is not beyond the realm of possibility, but we have to go through a 1920s German mark debacle with the US dollar to contemplate such a sequence occurring also without a new fiat currency introduced to take its place. That scenario is just nasty and perhaps unlikely.

  “And forget barter, as digital currencies like GoldMoney are already here and are simply waiting in the wings to put gold back in its rightful place, only much more securely and robustly.�

  I’ll forget about barter when I forget about the money regression. I’ll do that when someone successfully refutes it.

  “That said (and with all due respect), I think it's you who needs to take a deep breath and accept the fact that we stand on the threshold of a new era, one in which the state as we know it will pass into history and humankind will embark on a long-delayed journey of discovery.�

  LOL. You won’t see me complaining if we can loose the paper dollar, get back to a gold standard, and do it all without the fed’s cooperation or the pain of being reduced to barter first to get there. I’ll take that deep breath we have advised each other to take. But I won’t hold my breath for this new era.

  “Yes, the transition will be chaotic, but better that than the continuing chaos of the state. I mean, can you honestly look at the world today and not see that this insantiy cannot continue? Do you not see that the Internet is changing everything -- http://www.lewrockwell.com/orig/garris3.html -- and that as our money is returned to us, so will our freedoms be?�

  It sounds to me that if you are right, then my opinion is of little consequence as we are staring at a new inevitable era of sound money. But do I come across as being against such a thing? I’m just suggesting you give the money regression as laid out by Mises another thought just to double check that your vision of the future is consistent with it. My argument is that it is not.

  “Cheer up, buckle down, and buy gold.�

  I’m happy dude, and I already have gold.

  M.E,

  “With this: "There is always the chance that what Greenspan says is actually correct and true." I suggest that read his statements, as FedRes head, from the following point of view: he works for the Federal Reserve, a private corporation, not the USGov, or the people of the u. S. of A..
  “I found, from that POV, much of what was chalked up to "Greenspeak", became emanately clearer.�

  When you characterize Greenspan’s comments as immanently clearer, do you mean immanently honest, truthful and forthright? As in, he is not practicing the fine art of obfuscation simply because he is knowingly defrauding the American people in collusion with the criminal banking community and the federal government?

  It is true that his BS could be interpreted pretty accurately. It is also pretty clear that it was not ever meant to be interpreted accurately. But I suppose I digress.

  “As far as your belief that two "moneys" cannot concurrently circulate, I'd suggest you'd find many instances over time, including today, where that was exactly, at least, the case.�

  You have my attention and curiosity: where; when.
  

  Published: May 29, 2006 12:43 AM

• M E Hoffer

  Paul,

  The acceptance of the U$D, today, occurs in virtually all parts of the globe. In Iraq, at the very minimum, there are U$D and NID (New Iraqi Dinar) in concurrent circulation.

  In years past, the British Pound was accorded similiar.

  Singapore, still, today has 1:1 convertibility/usage with Brunei's currency, and they are freely used in one another's geographic territories.

  Many merchants, especially in economies that are geared toward tourism, frequently accept the currencies held by the traveler from the visiting country, often accepting the "foreign" currency at a premium.

  There is no doubt that the FedRes is the Fraud you purport. Can an individual running such a scheme ever be deemed: "Honest", no. But, surely, everthing he has ever uttered is not False. I meant what I said, when viewed "more properly", his statements became easier to understand. Diogenes, his ownself, couldn't find an "Honest Man" at the FedRes.

  Published: May 29, 2006 1:37 AM

• Paul Edwards

  M.E.,

  There are situations where the people of country A will accept currency of country B. But i don't think it relates to the situation of gold which we are discussing. Let's enumerate these situations:

  1. Country A's currency is so devastated, that any relatively stable foreign currency will seem more attractive. This happened in Germany in the 1920's where gold did not replace the mark. I would suspect that Iraq's new Dinar has a similar lack of reliability and appeal in the minds of the Iraqis today.

  2. Where the people of country A have daily exposure to foreign currency of country B because they deal with country B's people as tourists daily. Merchants will accept the currency for their customer's convenience, but they will redeem it for local currency if they wish to buy from others in their nation who do not deal daily with foreign nationals.

  As an example close to home, i know that Bellis Fair (Bellingham WA) merchants used to, or maybe still do take Canadian money. I also know they don't try to use their Canadian money at shops much further south. They certainly don't shop in Seattle with Canadian dollars. The very same is true north of the border.

  3. Where the government of country A tell their people that the currency of country B is to be accepted at the prescribed exchange rate and that they can't not accept it. This is not a market behavior, but legislation.

  People will prefer to deal either in their currency which they are familiar with, or if their currency is complete trash, they will want relatively reliable foreign exchange. People will be reduced to commodity barter only if neither of these other options is available, and only after that will gold again eventually emerge as currency. The bottom line is, a commodity money can't emerge spontaneously from the mere devastation of a fiat currency. It must emerge either from barter, or else the process that took the currency away from gold in the first place must be reversed.

  Published: May 29, 2006 3:01 AM

• Paul Edwards

  M.E.,

  “…surely, everthing he [Greenspan] has ever uttered is not False.�

  I am sure you must be right in this point. It’s just not a very reassuring vote of confidence for the poor fellow. On the other hand, I’m sure it really is the best that can be said of him. My meager little point was simply that I don’t consider him a great or reliable reference on the question of money. But others may differ and that’s fair enough.

  Published: May 29, 2006 3:13 AM

• George Gaskell

  If our economy gets sent to the Stone Age, it won't be as a result of market forces. It will be the result of government actions, first by debasing the currency and then continuing to force the debased currency to remain in circulation ...

  That did not occur only in France and Argentina. That is exactly how the Roman empire fell.

  When a money economy collapses, the violence starts. Security is economic activity, after all, and as such, it will become impossible to produce efficiently, just as it will become impossible to efficiently produce anything else, once the wheels come off the wagon.

  As a student of medieval and early modern history, I can tell you that the so-called middle ages were not nearly as backwards as the moderns believed, nor was ancient Rome as wonderful. But the 5th-10th centuries were pretty rough.

  Published: May 29, 2006 8:03 AM

• David White

  Paul,

  "Most people have no idea they are under compulsion to use the dollar."

  Nor do they know that the dollar isn't a dollar (as in a constitutionally-mandated amount of government-minted silver) but a dollar BILL issued by a private and wholly unconstitutional bank. But like I said, the American people are clueless, which is why they are deaf to what gold is going out of its way to tell them and why they will freak out when the dollar finally implodes, not knowing where to turn other than to the very same criminals who got them into this mess.

  "But when a currency implodes, what has happened historically? The German mark imploded. A new mark was created at some fixed ratio to it. Gold did not reassert itself."

  The Reichmark wasn't the world's reserve currency, and in any case, gold didn't reassert itself then for the same reason that it hasn't done so today: the powers that be are doing all in their power to suppress it -- http://news.goldseek.com/GATA

  But that was then and this is now. And now is entirely different -- http://www.oftwominds.com/blogmay06/housing-global-recession.html

  Glad you're happy, dude, and glad you're buying gold.

  Published: May 29, 2006 2:54 PM

• Peter

  But he blows it in the very first sentence: "As consumer spending goes, so goes the economy."

  Published: May 29, 2006 10:41 PM