What is money?

[Kshartle]

You're forgetting about C. Other parties that buy products and services with money.

If you think, again, that one party can aquire all the money in the world.....I have an earlier post on that. It's nonsense, even theoretically. If they could that money would not work so this is a non-starter.

No, no no. You're not understanding. There is no C in this example, because B represents the entire private sector as a whole. It's a MACRO example. So, in order for C to acquire gold to buy my goods, C needs to take out a loan from another gold owner. And it creates a debt trap because B and C will eventually run out of liquidity if A isn't spending money constantly.

You are basically trying to argue that there can never be a liquidity issue with gold. Am I'm telling you that IT ALREADY HAPPENED IN THE LATE 1800s!

How can C not exist? What in the frick did B with all the money they borrowed?!?!?!
This is a fairy tale riddled with nonsense and covered in absurdity. It is fragments of ideas slung together that don't make logical sense.

[Gumby]

I love this old saying:

Gold is the money of Kings
Silver is the money of citizens
Barter is the money of the poor
but FIAT is the money of slaves

I generally agree with that quote. Debt-based fiat is most definitely the money of slaves. But, debt-free fiat money (Bitcoins, for instance) would be no such thing. Thomas Edison wanted debt-free money (same as the Populist Greenbackers who wanted Free Silver). They all argued that debt-free money was the money of citizens.

The argument was that it makes no difference what backs your currency. What matters who controls your currency (either corrupt politicians or the people).

[Kshartle]

You're forgetting about C. Other parties that buy products and services with money.

If you think, again, that one party can aquire all the money in the world.....I have an earlier post on that. It's nonsense, even theoretically. If they could that money would not work so this is a non-starter.

No, no no. You're not understanding. There is no C in this example, because B represents the entire private sector as a whole. It's a MACRO example. So, in order for C to acquire gold to buy my goods, C needs to take out a loan from another gold owner. And it creates a debt trap because B and C will eventually run out of liquidity if A isn't spending money constantly.

You are basically trying to argue that there can never be a liquidity issue with gold. Am I'm telling you that IT ALREADY HAPPENED IN THE LATE 1800s!

You're imagining a deserted island with two people on it and one has gold and the other has an idea I guess.

I can't go on with this.

Does anyone have a comment on my synopsis of the government's position?

[Gumby]

How can C not exist? What in the frick did B with all the money they borrowed?!?!?!

My bad. You're right. Step 8 could be bought by the maker of the widget whom I bought from. But, in the riddle, I bought them from YOU.

Still, at the end of that riddle, who has most of the money? The banker.

[Kshartle]

But, debt-free fiat money (Bitcoins, for instance) would be no such thing.

Bicoins aren't fiat. We've been over this already at length I believe.

[Gumby]

But, debt-free fiat money (Bitcoins, for instance) would be no such thing.

Bicoins aren't fiat. We've been over this already at length I believe.

Fine, a debt-free fiat citizens dividend then.

[Pointedstick]

But, debt-free fiat money (Bitcoins, for instance) would be no such thing.

Bicoins aren't fiat. We've been over this already at length I believe.

I don't think so. Why don't you start a new thread?

[Kshartle]

How can C not exist? What in the frick did B with all the money they borrowed?!?!?!

My bad. You're right. Step could be bought by the maker of the widget whom I bought from.

Still, at the end of that riddle, who has more money? The banker.

The banker deserves more money if he has it. He provided the money up front and took the risk.

It doesn't matter that he has more. It's good that he has more. Whatever he funded was a good or service that we otherwise wouldn't have to enrich our lives. We are all better off.

Now that he has more he can fund other projects. He is doing an important job in making everyones lives better.

Money is a way to facillitate economic activity. It's not a scorecard. It's not immoral for someone to have more if they earned it through voluntary trade.

[Gumby]

The banker deserves more money if he has it. He provided the money up front and took the risk.

It doesn't matter that he has more. It's good that he has more. Whatever he funded was a good or service that we otherwise wouldn't have to enrich our lives. We are all better off.

Now that he has more he can fund other projects. He is doing an important job in making everyones lives better.

Money is a way to facillitate economic activity. It's not a scorecard. It's not immoral for someone to have more if they earned it through voluntary trade.

Are you a banker? What you are describing is a situation where bankers have all the decision-making power simply because they took the time to mine some gold while others were tending a farm.

[Kshartle]

Yes. Same as peanuts. Or slips of paper with dead presidents on them.

But for other economic discussions reffering to gold as money would be fine.

So this actually raises the question: what would people use as money absent government?

I think there's a lot of historical weight pointing to fiat substitutes of whatever commodity gets chosen. I mean, back in the days of gold money, people eventually started trading gold certificates because lugging all the coins around was a pain in the neck. But then you get right back to the dangerous game of the paper/electronic money supply expanding faster than the commodity backing it all over again…

A peice of paper backed by gold or something else isn't fiat though. It's only fiat if something is money by decree (violent threat). If it's voluntarty it's not fiat.

This should clear up the bitcoin confusion.

Definately not fiat.

[Kshartle]

What you are describing is a situation where bankers have all the decision-making power simply because they took the time to mine some gold while others were tending a farm.

You're describing miners not bankers.

People are free to make their own decisions when real money is used.

It's you who extol the virtue of a system where a gang of theives run a printing press to buy whatever they want and back it up with guns and dungeons.

[Gumby]

It's you who extol the virtue of a system where a gang of theives run a printing press to buy whatever they want and back it up with guns and dungeons.

Now you are putting words in my mouth. I never said that fiat money was good. I don't. I just said that the gang of theives is extremely good at keeping up their "funding" masquerade (i.e. they can never go broke).

[Kshartle]

It's you who extol the virtue of a system where a gang of theives run a printing press to buy whatever they want and back it up with guns and dungeons.

Now you are putting words in my mouth. I never said that fiat money was good. I don't. I just said that the gang of theives is extremely good at keeping up their "funding" masquerade (i.e. they can never go broke).

If I misrepresented you then I apologize. From my perspective you have seemed very supportive of fiat money. One can easily infer this because you have heavily criticized non-fiat money. Have I misrepresented that? Or are you just criticizing the entire concept of money and think we should be bartering?

[Gumby]

If I misrepresented you then I apologize. From my perspective you have seemed very supportive of fiat money. One can easily infer this because you have heavily criticized non-fiat money. Have I misrepresented that? Or are you just criticizing the entire concept of money and think we should be bartering?

No bartering. I don't like debt-based fiat money. I think people should have access to debt-free loans or a citizens dividend. A tiny bit of Economic Democracy, if you will. But, I am a realist and understand that it will probably never happen. When I reference MR, I am simply understanding that this is the system we have. It's our reality. Never said it was "good". It's not!

Anyway, all I was saying is that there was a well-documented liquidity problem with gold in the midwest during the late 19th century. It really did fail in that region, and the bankers certainly played a role that didn't benefit the farmers. The region was taken advantage of. So, I don't see gold as a good thing either. It gives too much control to the powerful (kings, goldsmiths, bankers, the rich, etc).

[Kshartle]

If I misrepresented you then I apologize. From my perspective you have seemed very supportive of fiat money. One can easily infer this because you have heavily criticized non-fiat money. Have I misrepresented that? Or are you just criticizing the entire concept of money and think we should be bartering?

No bartering. I don't like debt-based fiat money. I think people should have access to debt-free loans or a citizens dividend. But, I am a realist and understand that it will probably never happen. When I reference MR, I am simply understanding that this is the system we have. It's our reality. Never said it was "good". It's not!

Anyway, all I was saying is that there was a well-documented liquidity problem with gold in the midwest during the late 19th century. It really did fail in that region, and the bankers certainly played a role that didn't benefit the farmers. The region was taken advantage of. So, I don't see gold as a good thing either. It gives too much control to the powerful (kings, goldsmiths, bankers, the rich, etc).

Freedom or force. Those are the two choices. If you don't like what the slaves choose after they are free.......offer them something better.

Citizens dividend? Never heard of this concept.  Citizen is a euphemism for slave though. Citizen of what?

[Gumby]

If I misrepresented you then I apologize. From my perspective you have seemed very supportive of fiat money. One can easily infer this because you have heavily criticized non-fiat money. Have I misrepresented that? Or are you just criticizing the entire concept of money and think we should be bartering?

No bartering. I don't like debt-based fiat money. I think people should have access to debt-free loans or a citizens dividend. But, I am a realist and understand that it will probably never happen. When I reference MR, I am simply understanding that this is the system we have. It's our reality. Never said it was "good". It's not!

Anyway, all I was saying is that there was a well-documented liquidity problem with gold in the midwest during the late 19th century. It really did fail in that region, and the bankers certainly played a role that didn't benefit the farmers. The region was taken advantage of. So, I don't see gold as a good thing either. It gives too much control to the powerful (kings, goldsmiths, bankers, the rich, etc).

Freedom or force. Those are the two choices. If you don't like what the slaves choose after they are free.......offer them something better.

Citizens dividend? Never heard of this concept.  Citizen is a euphemism for slave though. Citizen of what?

It's interesting.

http://en.wikipedia.org/wiki/Citizen's_dividend

We had a commenter on the board here named Stone awhile back. I used to argue with him about the various hypothetical Post-Capitalistic monetary systems, and after many months I began to change my position and see that he was on to something. He proposed something very similar to Economic Democracy with a Citizens Dividend.

http://en.wikipedia.org/wiki/Economic_democracy

It sounds nuts when you first read about (scary socialism, etc). but I believe it is more fair than the system we have now or the in-debtedness/tribute of the past. I believe Martin Luther King, Jr. was involved a bit with forming Economic Democracy.

It's not perfect (what is?). But, it's interesting. Anyway, it would be interesting for people to have access to some debt-free money or interest-free money certain things (maybe tuition or local businesses, for instance) — rather than making an entire Macro society constantly indebted to itself.

[Kshartle]

So, I don't see gold as a good thing either. It gives too much control to the powerful (kings, goldsmiths, bankers, the rich, etc).

Gold limits the kings but yes.....things still suck when you have a king.

In a voluntary world the rich are the ones who give the most to society. They are the best of all of us. We want them to be rich. We want the best of us exerting the most influence.

Don't confuse the metal with the concept of slavery. It is tough to break through the programming we are all subjected to since before we could even talk.

Slavery and gold itself have nothing to with each other. A gold standard is just another version of slavery. Although there is a much greater limit on the evil that can be funded. Printing presses are a lot easier to run than gold mines.

[Kshartle]

I used to argue with him about Post-Capitalistic monetary systems

If we ever acheive capitalism we will never go back to anything else. It would be like arguing we need outright slavery to come back. Imagine making that case......people would look at you like you were insane.

Humans will eventually laugh at the non-capitalist system, non-free market systems we use now and point to them as "Barbarous relics".

Pieces of paper as money?!?!?! Bwahahahah. We laugh as Native Americans for using wampum. Ummm.....I'll bet wampum has more utility than peices of green paper.

[Gumby]

If we ever acheive capitalism we will never go back to anything else. It would be like arguing we need outright slavery to come back. Imagine making that case......people would look at you like you were insane.

Right, but what we have now is crony capitalism or a Plutocracy. So, I guess it was hypothetical post-crony-capitalism or whatever. I'm not sure I'm convinced that any society can achieve an ideal form of capitalism. Still, it's impressive (and sad) what we've achieved as a country.

Pieces of paper as money?!?!?! Bwahahahah. We laugh as Native Americans for using wampum. Ummm.....I'll bet wampum has more utility than peices of green paper.

Or Rai stones!

http://en.wikipedia.org/wiki/Rai_stones

[Kshartle]

If we ever acheive capitalism we will never go back to anything else. It would be like arguing we need outright slavery to come back. Imagine making that case......people would look at you like you were insane.

Right, but what we have now is crony capitalism or a Plutocracy. So, I guess it was hypothetical post-crony-capitalism or whatever. I'm not sure I'm convinced that any society can achieve an ideal form of capitalism. Still, it's impressive (and sad) what we've achieved as a country.

Pieces of paper as money?!?!?! Bwahahahah. We laugh as Native Americans for using wampum. Ummm.....I'll bet wampum has more utility than peices of green paper.

Or Rai stones!

http://en.wikipedia.org/wiki/Rai_stones

I call it crapitalism.

[Gumby]

I call it crapitalism.

Right. So, I think if I can relay our perspective in that by using Monetary Realism (MR), we don't endorse the system by any means whatsoever. We just acknowledge the mechanics of the (corrupt) machine and how the powers that be built it to have backup systems and highly manipulated fail-safes to keep them in power.

And it's not all evil. Some impressive prosperity comes from it. But, governments/bankers screw it up a lot of the time ...But that's also true of any monetary system.

[moda0306]

A limited supply of gold DOES limit the size of economic growth, otherwise we'll reach a point of full-on deflation, and more financial crises and unemployment as a result of limited liquidity in a monetized economy.  Being able to buy more and more goods with the same amount of money is not conducive to economic growth.  There's too much incentive to sit on your savings and not invest/spend.

The economy will likely fight to find ways around it, such as using other metals or barter, but this will cause huge unnatural restraints on our growth. 

[Gumby]

A limited supply of gold DOES limit the size of economic growth, otherwise we'll reach a point of full-on deflation, and more financial crises and unemployment as a result of limited liquidity in a monetized economy.  Being able to buy more and more goods with the same amount of money is not conducive to economic growth.

The economy will likely fight to find ways around it, such as using other metals or barter, but this will cause huge unnatural restraints on our growth. 

I would agree with that. I mean, I think Stone used to argue that the cost of goods could all deflate, and that would be OK. But, I have yet to meet anyone who was happy when the nominal value of their property and wages went down. It's human nature to want to see nominal numbers going up — even if the real value is falling.

There are entire media networks devoted to watching nominal values rise.   People seem to love it.

[Kshartle]

A limited supply of gold DOES limit the size of economic growth, otherwise we'll reach a point of full-on deflation, and more financial crises and unemployment as a result of limited liquidity in a monetized economy.  Being able to buy more and more goods with the same amount of money is not conducive to economic growth.

The economy will likely fight to find ways around it, such as using other metals or barter, but this will cause huge unnatural restraints on our growth.

Price of gold will go up as the economy grows.

Here's the equation:

General price level = Money supply/available goods and services

Let's call them.....GP, MS and AGS

GP = MS/AGS

When AGS goes up and the money supply stays the same GP goes down. That's all. No constraint. Money gets more valuable because it's scarce. This facilitates trade and growth because it provides an incentive to save. When people save they don't bury it in the backyard. They loan it out or invest it rather than consuming. That grows the economy.

Incidently did a dollar buy more in 1800 or 1900? I don't have the hard data, but I suspect you could buy more for a dollar in 1900 than 1800. Could be wrong here.

When money is too plentiful (ran off a press) it's a disincentive to save. It enoucourages artificial overconsumption that destroys growth. This is the current system.

Please feel free to refute with logic and reason and teach me.

[moda0306]

A limited supply of gold DOES limit the size of economic growth, otherwise we'll reach a point of full-on deflation, and more financial crises and unemployment as a result of limited liquidity in a monetized economy.  Being able to buy more and more goods with the same amount of money is not conducive to economic growth.

The economy will likely fight to find ways around it, such as using other metals or barter, but this will cause huge unnatural restraints on our growth. 

I would agree with that. I mean, I think Stone used to argue that the cost of goods could all deflate, and that would be OK. But, I have yet to meet anyone who was happy when the nominal value of their property and wages went down. It's human nature to want to see nominal numbers going up (even if the real value is falling).

There are entire media networks devoted to watching nominal values rise.   People seem to love it.

Well even in true economic terms, if you go from a world where gold has a 0% real return to one where it would have a 3% real return because GDP is trying to grow that much, the real growth of your risk-free asset will actually induce you (for REAL economic reasons) to not want to spend/invest as you otherwise would have.

This puts a false constraint on growth simply because someone decided only a yellow metal should serve as legal tender.