Comments (20)

• Aaron Singleton

• Aside from the business cycle aspect perhaps the most troubling problem caused by continually devalued fiat currency is that it undermines the common man's ability to save. Such a policy contributes greatly to the growth of the welfare state, not only because they make it possible for the government to pay for all sorts of social and welfare programs, but because the populace will demand that it do so. Social Security, medicare and welfare are all (partially at least) products of an expansionist monetary policy. They follow fiat money as night follows day.

• Published: September 23, 2005 10:36 AM

• Vince Daliessio

• I have gotten shot down on this point more times than I care to count. The American people do not save because, with a constantly-inflated fiat currency, dollars are worth less and less in real terms every second they are held. Not only do they spend all their own, they borrow as many as possible and spend those too. Because they cannot save their way to wealth (any gains are all inflated or taxed away) they are trying to spend their way to it, by buying what they hope are equities (houses, stocks),and objects that they think will make their lives more comfortable (SUVs, luxury items). Traditions of prudence aside, there is no rational incentive for anyone to save even one dollar, so no one does.

• Published: September 23, 2005 11:29 AM

• gene berman

• Vince and Aaron:

  Both of you state what is correct--and also obvious. And, in that sense, so has Dr. Polleit in the published piece on which we comment.

  We actually pervert Mises' intent ever so slightly by such discussion. Though he was certainly concerned with the various matters you (and the prof) have raised, the cited quotation leaves no room for doubt that is was human FREEDOM and its fate (and thus the fate of civilization) with which Mises was concerned, not matters of personal (or even government) finance.

  But Mises made a serious error in the process of his thinking on the matter, for which I cannot account, because it stared him in the face repeatedly. Rothbard does not seem to have understood any better (or even nearly as well--but that's another matter for another time, perhaps). As a matter of fact, I know no one--except myself, that is--who has manifested the slightest appreciation of the true, basic CAUSE of "monetary problems," including precisely why they have always been, literally, INEVITABLE.

  It is my opinion (for which I can offer no supporting evidence except a certain tenuous and untested logical process)that no system whatever could possibly deliver more than temporary improvement on that under which we live at present. But, further, that a single process (and certain modern technology and practice) has the potential to achieve all that Austrians (and other "sound money" advocates) have promoted ceaselessly: a monetary regime completely unfettered by authority and invulnerable to major manipulation.

  If you are more seriously interested in this matter, let me know at gene.berman@verizon.net-- it's not something I will discuss in this space and is in no way related to the proposals or pitches of the spectrum of sound money and gold advocates of any sort whatever.

• Published: September 23, 2005 12:23 PM

• Paul Edwards

• Gene:

  Is there by any chance a paper you have put up on a web site that you could link us up to that we could read?

• Published: September 23, 2005 12:48 PM

• gene berman

• No, Paul. Just send me an e-mail message and, when I am able, I'll put something together for those who express interest.

• Published: September 23, 2005 1:08 PM

• Dennis Sperduto

• CLJO, hear, hear. And last time I looked, the Morgan's and Rockefeller's were not members of or controlled by the group that incorrectly tends to be blamed for much of what is and has been wrong with the world.

• Published: September 23, 2005 3:45 PM

• gene berman

• S'prised at you, Dennis. Morgan was prolly Morganstern or Morganthau before he got a name-bob and, as for Rockefeller, just dropped the "n" from Rockenfeller. Just obvious when you know what to look for. Just wish I could get my split on the take, bein' a 100-percenter and all. Sure feel left out of all the controllin', too.

• Published: September 23, 2005 4:13 PM

• Vince Daliessio

• Uh, before we get into an ethno-economic discussion of the control of the money supply here, we should probably all re-read Rothbard's explication of the financial / political nexus between Wall Street, the banks, and Washington;

  http://www.lewrockwell.com/rothbard/rothbard66.html

  And as I recall, Rothbard isn't an anglo name...

• Published: September 23, 2005 4:28 PM

• Paul Edwards

• This is probably going to prove embarrassing, but i have to admit i have only the vaguest clue of what has been implied and inferred in the previous three posts. Or is meant to be that way?

• Published: September 23, 2005 4:59 PM

• Joe Kelley

• I for one (a 100-percenter too if the definition is synonymous with individual sovereignty) am eager to learn more about the single process (a certain modern technology and practice) which sounds like a move to regain control from those enforcing a monopoly to those on the other end of the stick.

  I suspect that the single process involves data encryption and communication technology. Will the real “sound money� advocates please stand up.

• Published: September 23, 2005 5:41 PM

• gene berman

• Joe:

  No--it's got nothing whatever to do with either encryption or any aspect of communication or information-processing. Just send an e-mail if you'd like to be included on the list to whom I'll address my ideas one of these fine days.
  

• Published: September 23, 2005 8:55 PM

• averros

• > I suspect that the single process involves data
  > encryption and communication technology. Will the
  > real “sound money� advocates please stand up.

  Count me in... I also happen to own a software company specializing in cryptography and communications.

• Published: September 23, 2005 9:25 PM

• wesley bruce

• Most post on the subject of currency miss a fundamental point. We drifted from gold to paper because it was difficult to make small denomination coins so they went to copper fiat currencies. Large denominations became heavy and inconvenient so they went to promise to pay notes. And the temptation arose to close the gap in the middle between the two kinds of fiat. Gold is also a soft metal making 5 nines gold currency prone to ware and easy to debase.
  I'm trying to come up with a more advanced form of gold in denominations of 100 to .01 grains [6.8 to 0.0006 grams]
  At this stage, while there is a lot of talk about returning to gold currency, there is no organization that really stands ready to finance and co-ordinate gold currency research and development. A little help please.
  

• Published: September 25, 2005 7:01 AM

• Paul Edwards

• Hi Wesley:

  There has never been any kind of technological motivation for drifting from 100% commodity based money to anything else. It has always been merely a question of a lack of ethics, and an abundance of greedy bankers and corrupt politicians. Sprinkle in with that a liberal dose of ignorance of the facts of money and banking amongst the masses and you get our present system of intuitionalized theft and counterfeiting brought to us all by our friendly bankers and government bureaucrats.

  Unfortunately (perhaps), commodity money has never, nor will it ever come about via the advocacy of trade or research organizations. The conditions required are precisely those described by Mises in the money regression theorem. Baring those conditions, such as our current circumstances with fiat currencies abounding, what must happen, as described by Rothbard, is that currencies such as the dollar must be intentionally brought back to a commodity basis by those who control the dollar: the government (which must also abolish the fed).

• Published: September 25, 2005 7:17 PM

• Vince Daliessio

• Paul Edwards sez;

  "There has never been any kind of technological motivation for drifting from 100% commodity based money to anything else. It has always been merely a question of a lack of ethics, and an abundance of greedy bankers and corrupt politicians."

  Exactly. The dollar was decoupled from gold simply to allow the US government to adopt bad economic policies that benefit it. Any mechanisms described that somehow legitimize fiat currency are simply ex-post-facto justification for immoral acts government was determined to commit.

  I have read that the gold mining industry grows the current supply extant at around 1.5 - 2% per year. This would outstrip population growth in Europe, and business growth everywhere else, so why again are we worried about deflation? Because we have been taught to fear it by our leaders.

  Look, I have no quarrel with basing a currency on anything tangible and valuable, whether it be gold, silver, copper, land, etc. What I and most Austrians object to is money that is based not on tangible assets, or even on some nebulous "bills", but on the evil desires of politicians and armaments makers.

• Published: September 26, 2005 9:26 AM

• billwald

• "with a constantly-inflated fiat currency, dollars are worth less and less in real terms every second they are held."

  Only if they are held as cash. "Saving" must be differentiated from "investing."

  "Not only do they spend all their own, they borrow as many as possible and spend those too."

  People are either savers or spenders. Saving is like church tithing. People who lived through the Depression (and their children) tended to be savers (and tithers) but taught neither to their children.

  "There has never been any kind of technological motivation for drifting from 100% commodity based money to anything else. It has always been merely a question of a lack of ethics, and an abundance of greedy bankers and corrupt politicians."

  Cart before horse. Money was invented because people were NOT honest or ethical. People were more free before money was invented. But freedom is dangerous and risky.

• Published: September 28, 2005 9:44 AM

• wesley bruce

• Both Paul and the others are accurate but miss my point. If a truly convenient gold currency could be crafted it would out compete fiet currency, banks willing to handle it would emerge and compete internationally via the internet and this would force government to do one of two things:

  * Ban it publicly and loudly.

  * Accept it and drop the dollar and all other currencies.

  The former would be very public and very political giving populations in a time of high inflation the impetuous to push politicly for the latter result. The sham of economic validity and legality would dissolve and a the first population [not government] to adopt it would be in a powerful economic position with both saving and terms of trade being of much more value than they are today.

  If we are correct and the free market can out compete any dictatorship then a single country adopting a return to gold and other Misian principle would, within a generation or two, own the free world. It would be immediately obvious that countries adopting the ban are not really free. At the very least I could expect we could adopt the currency as a way to buy our books from the mise web site.

  There is a strong tendency of Misian writers to think in terms of changing America without considering what could be done in the third world; world wide or at the interplanetary level. In a few decades New Nation States will form on Mars; in the asteroid belts and on our open oceans. Fusion technology and other break throughs will allow the colonisation of the solar system and we need to think about the art of crafting new constitutions.

• Published: October 2, 2005 12:21 AM

• wesley bruce

• Both Paul and the others are accurate but miss my point. If a truly convenient gold currency could be crafted it would out compete fiat currency. Banks willing to handle it would emerge and compete internationally via the internet and this would force government to do one of two things:

  * Ban it publicly and loudly.

  * Accept it and drop the dollar and all other currencies.

  The former would be very public and very political giving populations in a time of high inflation the impetuous to push politicly for the latter result. The sham of economic validity and legality would dissolve and a the first population [not government] to adopt it would be in a powerful economic position with both saving and terms of trade being of much more value than they are today.

  If we are correct and the free market can out compete any dictatorship then a single country adopting a return to gold and other Misian principles would, within a generation or two, own the free world. It would be immediately obvious that countries adopting the ban are not really free. At the very least I could expect we could adopt the currency as a way to buy our books from the mise web site.

  There is a strong tendency of Misian writers to think in terms of changing America without considering what could be done in the third world; world wide or at the interplanetary level. In a few decades New Nation States will form on Mars; in the asteroid belts and on our open oceans. Fusion technology and other break throughs will allow the colonisation of the solar system and we need to think about the art of crafting new constitutions.

• Published: October 2, 2005 12:27 AM

• Paul Edwards

• Hi Wesley:

  I'm not quite convinced (yet) that i have missed your point. But your comments remind me to make one of my own which i think is worth considering, even if you disagree in the end. The point was made by Rothbard, and i think it always bears repeating. No one is going to be able to replace or complete with the dollar or any other popular currency with any new commodity money. That's the short form of the point. Rothbard's longer argument of why this is the case can be read here

  http://www.mises.org/story/1503 "The Case for a Genuine Gold Dollar"

  and a snippet of it is this:

  "Even the variant on Hayek whereby private citizens or firms issue gold coins denominated in grams or ounces would not work, and this is true even though the dollar and other fiat currencies originated centuries ago as names of units of weight of gold or silver.[8] Americans have been used to using and reckoning in "dollars" for two centuries, and they will cling to the dollar for the foreseeable future. They will simply not shift away from the dollar to the gold ounce or gram as a currency unit. People will cling doggedly to their customary names for currency; even during runaway inflation and virtual destruction of the currency, the German people clung to the "mark" in 1923 and the Chinese to the "yen" in the 1940s. Even drastic revaluations of the runaway currencies which helped end the inflation kept the original "mark" or other currency name."

  I would not mind discussing this further because i have always found it an interesting point of debate.

• Published: October 2, 2005 7:05 PM

• Paul Edwards

• "complete". that's compete.

• Published: October 2, 2005 7:07 PM