Cullen Roche interview

[Kshartle]

MR isn't stating that it's "morally correct" that we have "rights" to property via printed fiat money, but this is how things work in reality, and reality is what MR is concerned with.

Was I wrong in my analysis of what fiat money is?

[moda0306]

MR isn't stating that it's "morally correct" that we have "rights" to property via printed fiat money, but this is how things work in reality, and reality is what MR is concerned with.

Was I wrong in my analysis of what fiat money is?

Somewhat.  You definitely view it as a chartalist scam.  In some ways, you are correct.  We have a tendency to use U.S. currency partially because it's mandated by law to settle debts.  However, people keep it on their balance sheet to a degree they wouldn't if they thought it was a scam that was screwing them over.  Just as you seem to do, people can structure their contracts how they want, and can save in gold and stocks and other items that won't screw you in an inflationary event.  Yet people KNOW the fed is going to target 2%-3% inflation, and they save in fixed-income assets anyway.  This shows to me a huge amount of willful participation in our currency regime, and I think the way you describe it isn't the way the vast majority of Americans and major market players would.

[Kshartle]

MR isn't stating that it's "morally correct" that we have "rights" to property via printed fiat money, but this is how things work in reality, and reality is what MR is concerned with.

In reality the "rights" to property via printed fiat money are not rights. They are 100% dependant on the temperance of the guys with the guns. Looking at them through this clouded, distorted lens blinds you to the risks when the scales tip in favor of more and more printing.

What benefit is there to look at the slips of paper as claims on property? How does that help you? This question has been asked repeatedly by several members and the response is always the rhetorical question, "Doesn't it help you to know how things work"?

This is not an answer it's the avoidance of one. I imagine it's because there is no answer. I am open to being proven wrong.

[Kshartle]

MR isn't stating that it's "morally correct" that we have "rights" to property via printed fiat money, but this is how things work in reality, and reality is what MR is concerned with.

Was I wrong in my analysis of what fiat money is?

Somewhat.  You definitely view it as a chartalist scam.  In some ways, you are correct.  We have a tendency to use U.S. currency partially because it's mandated by law to settle debts.  However, people keep it on their balance sheet to a degree they wouldn't if they thought it was a scam that was screwing them over.

Belief does not create reality. Saying people jump off the Empire State building a lot more than they would if they understood they would go splat doesn't change the reality of them going splat.

Obviously holding your wealth in slips of paper that can be printed in endless quantities is not the economic equivalent of going splat, until it is.

It is not a right to do anything or at least not one you have any control over. It can be taken away and should be viewed in that context and prepared for. That's all i argue for....a realistic view of what it is, not a mischaracterization. 

[moda0306]

Was I wrong in my analysis of what fiat money is?

Somewhat.  You definitely view it as a chartalist scam.  In some ways, you are correct.  We have a tendency to use U.S. currency partially because it's mandated by law to settle debts.  However, people keep it on their balance sheet to a degree they wouldn't if they thought it was a scam that was screwing them over.

Belief does not create reality. Saying people jump off the Empire State building a lot more than they would if they understood they would go splat doesn't change the reality of them going splat.

Obviously holding your wealth in slips of paper that can be printed in endless quantities is not the economic equivalent of going splat, until it is.

It is not a right to do anything or at least not one you have any control over. It can be taken away and should be viewed in that context and prepared for. That's all i argue for....a realistic view of what it is, not a mischaracterization.

Kshartle,

You're obviously stuck so deep in your view that we're all oppressed sheep, and your emotional reaction to what you see as that oppression, that any debate at this point it looking pretty fruitless.  If you're right, and the government is just holding guns to our head to make the dollar valuable, then what's to say that can't go on?  Governments have been "forceful" to their societies for Millennia... yet somehow some of those societies thrived incredibly.  People have been incredibly productive around their "oppressive" governments.  Why won't this continue?

You ask people to take responsibility for their actions.... maybe they have already.  Maybe they've stayed in the U.S. (or wherever they stay) because they like all the good things about it... or their town, or state.... all with their own police forces, welfare centers, and tax-collectors "terrorizing us."  Maybe, either people don't value freedom and individual sovereignty as much as you do, or your definitions/impressions of the compromises of our freedom is simply incorrect, or the Maybe people ARE behaving on their free will by living life to its max in their oppressive communities, and you aren't the one taking ownership of your plight.

Either way, it seems that you're so locked in to YOUR view of individual sovereignty, and the importance of that for everyone else, that you're unable to even see what free behavior surrounding our government looks like... because to you none of it is freedom... it's all just slavery and we don't realize it.

I guess all we can do is sit and watch as your economic model continues to prove itself incorrect over and over, waiting each time for a new excuse as to why disaster hasn't struck... yet!  Maybe, just MAYBE, you misunderstand human nature, and that's clouding your judgement in your economic modelling.

[Tom Brown]

Kshartle, IMO money is a social construct. The objects associated with it (electronic bank deposits, paper, gold coins) are tokens reflecting that construct. Did the native Americans of the Sierra Nevada inherently value the yellow rocks they no doubt saw in the rivers and streams? ... or did they value the rivers and streams and the trout they contained more? It wasn't until the new arrivals came in vast numbers, looking to obtain those yellow rocks (by any means necessary: including the destruction of those rivers and streams, and the trout they contained) that the social construct of what was valuable changed for them. No doubt it will change again and again in the future as well.

There's an interesting debate related to this issue that's (hopefully) just starting up between Nick Rowe (MMist) and Vincent Cate (Austrian-leaning hyperinflationist) right here:

http://worthwhile.typepad.com/worthwhil ... 8b9336970b

[Kshartle]

If you're right, and the government is just holding guns to our head to make the dollar valuable, then what's to say that can't go on? What do you think fiat money is? Would you trade your property for an unbacked slip of paper if there wasn't a bunch of guys with guns telling everyone they can't refuse it as payment of debts? Come on man. As I said it will go on much longer. Not understanding what it is though and pretending it's something other than what it is leaves you unable to properly assess the risks.

you're unable to even see what free behavior surrounding our government looks like...huh? Is the guy in prison, when picking between brussel spouts or peas as the vegetable on his plate...exercising free behavior?

[Kshartle]

No doubt it will change again and again in the future as well.

Are you saying you have no doubt that gold will at some point only be valued based on it's extrinsic properties (industrial uses or perhaps as jewelry also?)

What do you mean in practical terms with the statement above and what is the basis for this beleif (if you would be so kind)?

[Xan]

MR isn't stating that it's "morally correct" that we have "rights" to property via printed fiat money, but this is how things work in reality, and reality is what MR is concerned with.

What benefit is there to look at the slips of paper as claims on property? How does that help you? This question has been asked repeatedly by several members and the response is always the rhetorical question, "Doesn't it help you to know how things work"?

If it's all just slips of paper, then why do you care?  Can't there be a discussion about how the banking system works?  Is that discussion verboten just because you don't like it?

Suppose this were a discussion about the relative merits of various fine wines.  Would it be helpful if somebody kept piping up, saying "it's all just grape juice, it all tastes the same, CAN'T YOU SEE THAT!!"?

Why would a person who didn't like wine care what people were saying about it?

[moda0306]

MR isn't stating that it's "morally correct" that we have "rights" to property via printed fiat money, but this is how things work in reality, and reality is what MR is concerned with.

What benefit is there to look at the slips of paper as claims on property? How does that help you? This question has been asked repeatedly by several members and the response is always the rhetorical question, "Doesn't it help you to know how things work"?

If it's all just slips of paper, then why do you care?  Can't there be a discussion about how the banking system works?  Is that discussion verboten just because you don't like it?

Suppose this were a discussion about the relative merits of various fine wines.  Would it be helpful if somebody kept piping up, saying "it's all just grape juice, it all tastes the same, CAN'T YOU SEE THAT!!"?

Why would a person who didn't like wine care what people were saying about it?

That, and let's not forget that T-bonds are ALSO just slips of paper.  I can use them to bid up the prices of assets by using them as collateral and having the bank make "new money."

If you want to say that any fiat system is doomed to fail, I guess that's fine.

Saying that we're hastening by trading confetti for confetti is something else entirely.

[Libertarian666]

MR isn't stating that it's "morally correct" that we have "rights" to property via printed fiat money, but this is how things work in reality, and reality is what MR is concerned with.

What benefit is there to look at the slips of paper as claims on property? How does that help you? This question has been asked repeatedly by several members and the response is always the rhetorical question, "Doesn't it help you to know how things work"?

If it's all just slips of paper, then why do you care?  Can't there be a discussion about how the banking system works?  Is that discussion verboten just because you don't like it?

Suppose this were a discussion about the relative merits of various fine wines.  Would it be helpful if somebody kept piping up, saying "it's all just grape juice, it all tastes the same, CAN'T YOU SEE THAT!!"?

Why would a person who didn't like wine care what people were saying about it?

I guess I should start a discussion about whether it is better to be hanged or shot. Can't you see there's a difference???????!!!!!

[Lowe]

That does warrant a discussion, though, because there is a difference.

[Kshartle]

Can't there be a discussion about how the banking system works?  Is that discussion verboten just because you don't like it?

The title of this thread is Cullen Roche interview. Tom posted a link to an interview where Cullen says that the US can't run out of money because it has a printing press and doesn't have pay off it's debts because we have a debt-based monetary system. Are those topics off limits? Should we just conclude with nodding agreement and not explore the implications?

Systemskeptic posted an article written by Cullen where he said people buying stock were not really investing...they were allocating savings and that if everyone stopped viewing gold as money it's value (I imagine he means price in dollars) would drop significantly. Are those topics off limits? Should we just conclude with nodding agreement and not explore the implications?

Tom made the comment that it can be argued that fiat currency, though not obviously having official backing, is informally backed by the productivity of the nation that is governed by the currency-issuing government. Is that topic off limits? Should we just conclude with nodding agreement and not explore the implications?

If you want to have a discussion of the mechanics of the banking system please please don't let me stop you. If I chime in and it strays from what you want to discuss then please ignore. However if you start calling fiat money some type of scorekeeping method that entitles you to something or suggest that everyone could suddenly decide gold is not money (store of value, medium of exchange) or the US gubmit can just print so it can't run out money......I will probably challenge these assertions and want to explore the foundation and implications of such beliefs. 

[Tom Brown]

Someone here was concerned with IPO vs secondary market stock purchases... I'm not sure this covers it, but I think this was the pragcap article I was thinking of:

http://pragcap.com/yes-government-defic ... ent-151192

I'll keep looking to make sure... a lot of comments there... shoot! I think most of the examples were in the comments.

[Tom Brown]

Ah, saving vs investing! Now I recall... Cullen's whole thing on that is MOST people are saving. That's just the way he puts it. Since he runs a business advising people financially, he likes to emphasize that point because he feels the vast majority of people get themselves into trouble imagining that they are "investing." His  point is you should "invest" yourself in your primary means of obtaining an income flow, i.e. your job (that applies to most all of us). Don't think that you're going to retire early due to your brilliant "investing" and beating the market.

To tell you the truth, I usually skip  the "practical" articles like that. I'm more interested in the other articles he writes. But if I recall correctly, there's nothing more to that "savings" vs "investing" comment of his than that. Take it for what it's worth.

[Kshartle]

Ah, saving vs investing! Now I recall... Cullen's whole thing on that is MOST people are saving. That's just the way he puts it. Since he runs a business advising people financially, he likes to emphasize that point because he feels the vast majority of people get themselves into trouble imagining that they are "investing." His  point is you should "invest" yourself in your primary means of obtaining an income flow, i.e. your job (that applies to most all of us). Don't think that you're going to retire early due to your brilliant "investing" and beating the market.

To tell you the truth, I usually skip  the "practical" articles like that. I'm more interested in the other articles he writes. But if I recall correctly, there's nothing more to that "savings" vs "investing" comment of his than that. Take it for what it's worth.

I was trying to understand what the practical difference is Tom, as in.....are these just a bunch of meaningless words or is than an actual point here? What difference does it make to the "investor / allocator of savings" how they view what they are doing? This is not clear from the article and it smelled to me like someone just throwing something against the wall to see what sticks. Basically he's taking something obvious (when you buy stock on the secondary market the funds don't transfer to the company), and trying to make that look like an actual insight he's had that is valuable.

There are a lot of charlatans out there in the financial world.....I'm not saying he is.....but when someone says something that's obvious and pointless......it kinda makes me think they might be.

Of course the entire rationale for the statement could be lost on me. It happens. I'm dumb. I didn't pick up any of that stuff about investing in your job or whatever from the article. I'll take another look. I probably missed it.

[Kshartle]

Of course the entire rationale for the statement could be lost on me. It happens. I'm dumb. I didn't pick up any of that stuff about investing in your job or whatever from the article. I'll take another look. I probably missed it.

Nope....didn't miss it. Here's what I read (the link to the article he references ends up at a page saying "page not found"):

Last week at the Orcam site I published what I believe is an incredibly important piece on the concept of investing.  Basically, I summarized the fact that none of us are really “investing”? in secondary markets.  That is, when you buy stocks on an exchange you are not really an investor.  You are just allocating your savings.  Real investment is done on primary markets via IPOs or via private equity or through private purchases not consumed for the purpose of future production.  What most of us do through our portfolios is allocate savings.  You obtain income that goes unspent and you then allocate that into various asset classes like stocks and bonds.  But these assets serve very different purposes in terms of portfolio construction.