The support for 'hard money' is based upon ignoring all the problems that 'hard money' created in the life of the Republic. But, more importantly, all money is 'fiat' money. Unless you're bartering for products with intrinsic value directly between market participants, you're dealing with something that is not 'real' in the same way an orange or sewing machine is real.
All money is fiat money. It's simply a thought in your head that gold or silver is more 'precious' than some other metal (or even a piece of paper).
The only real currency is trust. When trust breaks down *no* currency works.
All true enough, though, in the event of the collapse of modernism, gold and silver coins would be treated much more precious than say, copper or steel coins. That is not merely in one's head, that is a reality of matter. Though also, no currency has any value at all unless people believe in it.
My objections to 'hard currency' has to do with actual historical failings of this form of currency when used for an entire economy. I don't object to some areas using precious metals for 'money' but I do not think that 'hard currency' is a universal panacea for the failings of allowing the wrong kind of people to control the means of currency production.
The primary problem of fiat currency isn't (temporary) over-production of currency it's *getting rid* of excess currency when it's no longer needed. This is typically where 'taxation' comes in, but the government doesn't actually destroy the money it receives but, rather just cycles it back into the economy.
I would agree hard currency is not a panacea for the excesses of fiat, however fiat seems like it is merely an excuse for elite to make for more war, as we have seen since the advent of the Federal Reserve, and especially after we went off the gold peg in the early 70's.
Obviously any currency hard or fiat can be problematic. But I'm not talking here about what society should do as much as I am about individual crisis management and empowerment.
As for what society should do for a currency, I don't feel prepared to say, though I am mindful, during the great depression hundreds of alternative currencies popped up. Something like a period of experimentation would be useful, I think. Decentralization I suspect is necessary just now, or bankers, globalists and corporations are going to effectively lock us down.
Respectfully, I disagree. We need to look at currency the same way we looked at the problem of internal combustion or the production of electricity. Despite 'money' having been around for thousands of years, the basic technology hasn't changed at all (and neither has the institutional framing). So, in my view, our civilization could benefit from opening up 'currency' to the same intuitive and inventive development that *other* technologies have been subject to.
Why is 'money' the only important everyday technology whose *technological development* is completely off the table?
5000 years ago a system was developed and virtually nothing has changed about since 'fractional reserve banking' was created in the late 1400s.
It's an absurd situation.
We need to desacralize monetary policy and the production of money and look at it like any other type of production process.
Just gonna drop this here. Sort of ironic that Andrew Jackson is the face of the $20. He was as anti-Fiat as they come. Like he literally dissolved the National Bank. Just … so ya know.
I would add that Frederick Taylor and his Scientific Management movement started in 1908 and with his testimony to Congress regarding efficiency and the need to control the very movement of workers to increase yields, played a large role. It is our own brand of industrial age collectivism that Stalin praised and hoped to adopt.
Interesting. I did not know that. Yes, I suppose, that sounds like an early version of what John Dewey and Woodrow Wilson put together for America, regimented schooling for automaton cogs, for The Machine. A good recipe for eternal war.
Henry Ford picked this up, spun it a bit for his "Fordism" and that his what Stalin fell in love with.
Despite their power deriving from capital markets, the industrialists at the turn of the 20th century were for collectivization and regimentation of society, but not for the altruistic reasons that Marx cited, although Ford would claim that it provided for a better life for his workers. But the key there is "his workers".
Taylor testified before Congress and in that testimony he prattled on about how he would teach the proper way to shovel. This is technocracy and hubris all rolled into a presumptive expert. I wonder what Mark Twain's reaction to that would be?
Just gonna drop this here. Sort of ironic that Andrew Jackson is the face of the $20. He was as anti-Fiat as they come. Like he literally dissolved the National Bank. Just … so ya know.
Yes, this was noted in the article and is intentional as a sort of F-you to Jackson by the banker families who are well aware of his historical opposition to their nefarious schemes.
There is no punishment too cruel or too unusual for the banksters. They really are the spawn of demons. We need to end the Fed (and the IBS/IMF/any other central bank) the same way the French ended their monarchy.
Banks require ever more bailouts because they legally kite checks. Maturity Transformation is proper term. If banks had to use 30 year money to make 30 year loans, then the system would be stable.
New businesses of any scale need capital. If you think bank loans are usurious, check out the effective price of venture capital.
The Biblical law outlawed interest bearing loans to fellow Hebrews. Zero interest loans were the main form of charity. However, those loans were zero interest in hard money, and if you didn't pay them back, you were subject to up to 6 years of indentured servitude.
Except for student loans, we have bankruptcy as an option in the United States.
If we must have interest bearing loans, why do we need VC vultures and Central Bank families? And yes, there is bankruptcy for individuals, however, it won’t really matter once the Fed and Gov destroy the dollar, what with our runaway national debt.
No argument about the runaway national debt. If I was to run for president, it would be on the Sith Party ticket: cut government AND raise taxes. Slogan: "If you are tired of the LESSER of two evils."
Ha! I think Mr Potato Head would get more votes. Take your medicine! Though, who knows, that sith party platform gives both partisans something they want.
For higher risk ventures, equity financing is reasonable.
I read somewhere that in Europe banks are able to do equity financing. That is illegal here.
Small scale startups for ordinary businesses are pretty much dependent on SBA loan guarantees. This gets the federal government's fingers into everything.
Some of the people who write about money and finance, etc., do understand what they are talking about, but don't always use the best language to discuss and describe what they want to say. I fear a little of that is happening here, but I am encouraged (and agree) that at the end of the essay you do say: "No money is infallible, all money comes with costs, but gold and silver are the best money. If there is WWIII, the surest wealth will be tangible assets, the only real security will be local, friends and family."
It has taken me a long time to learn/ discover what I think I know about this. (I certainly have more to learn!) There are also a lot of investment newsletter writers and other "economists/journalists" who convey the sense that they understand all of the various ins and outs around what is both a very simple and a very complex topic - especially related to banking, and to a lesser extent the various types of investment vehicles and their respective interactions. But if I don't quite understand what they are saying or explaining, I suspect they may not fully understand reality themselves, either. Language and jargon are not always our friends in this domain. [I like John Tamny's and Kevin Williamson's explanations of economics oriented to the intelligent but ignorant layman, but they avoid deep topics for that audience. I might some day hope to better understand, for example, this (cited by The Tree of Woe): https://blogs.worldbank.org/allaboutfinance/accounting-view-money-money-equity-part-i
And just FYI: two section titles from this World Bank (!!) essay are Money Is Not Debt and Money Is Equity.]
For me, money is no more and no less than the AGREEMENT to use a given physical, or abstract, or digital commodity to provide the functions of a medium of account, a store of value, and a medium of exchange. Typically governments have taken on or have taken over the role of managing a societies' money, but private versions are also available (and used quite widely if only episodically - see for example the ticket stub you use to get entry to the theater seating venue.)
In any case, the usefulness of money is so great that we will continue to use a given version of it even when it is being distorted and mismanaged, until finally it loses so much of its value as to no longer be useful, and an alternative form of money must be selected, agreed to, and used instead. [Petro-dollars, anyone!?]
Thus, the core idea or entity of interest is not "money" but the VALUE for which money is used as a surrogate (typically in lieu of a more complicated system of barter). Mismanagement of the money is the real issue, not the form of money being mismanaged. Any physical or abstract money can be mismanaged (even Au and Ag, which also have problems of not being sufficiently available to support a truly robust modern global economy - so I am a skeptic about using them, although possibly a basket of commodities might be able to perform an equivalent role to retain a "sort of stable value"?)
Thus we really need an accounting system that focuses on "Value". Locke suggested someone accessing a portion of "nature" that no one else possesses or "owns" could create "property" by applying their human mental and physical "labor" to it (hand axe, Si wafer, etc.). This property then contains the value of that labor, as a minimum (perhaps). But value is SUBJECTIVE; and what is worth a day of one person's labor might or might not be viewed as equally valuable by someone else. This is the stumbling block when Marx came along and tried to use the same Labor Theory of Value, which proved deeply flawed since labor is typically only a modest component within industrial production and the value ascribed to the final end product on the retail shelf. [Capital is also "previously captured" labor, and more, but I won't dwell on that side topic here.]
Perhaps in a pre-Fiat monetary system, money was a store of value (until it wasn’t). Fiat money is most certainly not a store of value and was never intended to be. It is useful because it’s easy to exponentially multiply, making it extremely liquid and plentiful. The theory is that more money sloshing (being loaned) around the economy stimulates the economy; although all it really does is inflate prices of securities, real estate, wages, and everything else. Technically the prices aren’t increasing, the value of the fiat is decreasing. Anyways, the more you create the more interest you can generate on loaning it out, thus enriching those who are “creating” it (the central bank). So the Federal Reserve creates money to purchases debt from the US gov (and others), and reaps the interest. Insane.
To continue our drinks while addressing a couple more points, with which you hopefully do agree - but it is ok if we don't. :-)
In reference to "demand", John Tamny points out that before there can be any economic demand (rather than a noneconomic and ineffectual desire), someone [the demander/buyer] has to produce something. This seems counter intuitive until you recognize he means that until you produce something to trade in the marketplace (goods, services, skills), you have no way to pay for what you desire and thus cannot achieve an economic "demand" transaction. Same for the other party [arrowheads for baskets, or arrowheads for shells and then shells for baskets = same difference = the shells lubricate but don't fuel the transaction]. I believe John cites Ricardo or Adams as presenting this idea initially? This is part of the "not so clear" meaning behind "supply-side" economics.
Some years ago I explored what MMT was about, and came across this item by Cullen Roche in 09/07/2011: http://pragcap.com/mmt-critique A Critique of MMT From the MR Perspective; The following is a constructive critique/criticism of Modern Monetary Theory from the view of Monetary Realism.
Setting aside any absurdities about MMT, Cullen provided a thought that I found helpful: money has to be created and then distributed before it can be used. Initially he proposed the Fed created the money as a "vertical" action in the market; and then the banks distributed it as a "horizontal" action in the market. I think he (here or later on) revised his view about the Fed being the largest creator of money and recognized that the commercial banking sector was, both as creator and distributor. It is their discipline to identify and lend only to presumably creditworthy borrowers that provides some checks on the excessive creation of money, as they fail to receive interest on failed loans. The Congress (constitutionally) and the Fed also create money, but too often without benefit of a profit/loss discipline. Now some forms of infrastructure spending are worthy and it is acceptable to place our children and grandchildren under obligation to repay those loans since they are also beneficiaries of said infrastructure. But since we don't have any form of balanced budget requirement in the constitution (as difficult as that might be to do well), the feckless politicians pump out money to buy votes from greedy undisciplined and unvirtuous citizens.
I am still fuzzy on exactly how and what role reserves play in all of this, for both the commercial and the Fed bank sectors, and if there really are any meaningful legal restraints or not, or we just pretend that there are involved and controlling somehow?
I suspect this conversation would be better held across the lunchroom table at the Foundation's cafeteria, while we each drink our beverage of choice. :-) I agree and disagree with parts of your reply.
The abstract nature of thinking about money as an "agreement" means we have to pretend it carries meaning and content, essentially totally of our own making and not (strictly speaking) related to any physical content or object outside of us. This can be a difficult idea to adopt when we have been reared on economics ideas that claim more for money than is there. [I had my two semesters of econ in college prior to when Nixon took the US off of the gold standard in 1971. I don't recall, but I probably passed, at best, with B's, or maybe a C. I fear my mind was not aligned to a lot of what was presented. Move up to 1974 and I learned from a Howard Rush investment newsletter about inflation being a solely monetary result, prices increasing as the value of the "money" decreased. Thus I fully agree with you on that view of things, to the point that I cringe when I see comments or statements that conflate price changes (increases) that can be (fully or partially) allocated to real marketplace supply and demand changes, as that "by itself is not inflation -- really!" (i.e., when defined correctly). It confuses two different economic actions of supply/demand and money supply adjustments [where money is a pretend participant whose supply should on be created per the following.]
The idea that "that more money sloshing (being loaned) around the economy stimulates the economy" appears to have come from Keynes (or someone earlier?), but he/they got it wrong. This view thinks of money (that pretend entity) as providing the "fuel" for the engine of the economy (via "demand", whereas in reality it is simply the "lubricant", in the form of available "capital" (or money capital surrogate until converted to physical/mental capital) to support the growth expanding ideas from innovators and entrepreneurs. These in turn increase productivity and the cycle can continue (as in Silicon Valley) as long as there is sufficient money capital being made available from VCs and banks, etc. It is clearly a tricky balancing act to match the quantity of money/capital required to support the available growth enhancing opportunities, but not too much money, or inflation results as you state, and we end up with "too much money chasing too few goods".
The Foundation Cafeteria is a place where open and honest discussion about the future of the human race is encouraged. An apt setting to engage with fellow Foundationers on topics such as this.
You are spot on about my Keynesian allusion, it is bullshit. I agree that MMT is inadequate, and am personally more in alignment with the Austrian principles. You are clearly more versed than I on these matters as evinced by your analysis, and I am unfit to further develop these abstractions.
Of course money has to be created and distributed before it can be used, just as food has to be gathered and prepared before it can be eaten. My problem is the top-down system of money creation where those that create it (central bank) and those who initially receive it (commercial banks/gov contractors) are enriched at the expense of those downstream, because the incessant increase in the money supply without a corresponding increase in growth equals inflation. Always at the expense of the wage earning class.
" You are clearly more versed than I on these matters as evinced by your analysis, and I am unfit to further develop these abstractions."
I am not sure that is true. These ideas are both "simple" and (being abstract) complicated for some people to recognize - but not hard to understand once they grasp the fragility and nebulousness of "money" when seen this way.
"Of course money has to be created and distributed before it can be used..." but many of the things we "just accept" can also cause amazement when they are obvious but never stated explicitly -- until they are. I understood about mints and printing of currency, but strictly that is only the creation of two forms of the medium of account, while the agreement to grant that authority to that agency or bank to do so is the "hidden" factor we don't always recognize.
"Always at the expense of the wage earning class." And yet, as a form of money capital ahead of being used for purchasing physical and mental capital, it is also necessary for an economy to grow. Yes, it can be abused, and I suppose some regulatory adjustments might help keep the balance between the need for money and the supply more closely aligned - but I am not quite sure yet just what they might be. :-(
And we both know that sometimes a comment thread is not the best or easiest way to explore these ideas. :-)
I am no expert on how to set up a proper currency, but human nature being what it is, a society with a currency based on debt will eventually consume itself, as the West is. As to gold and silver, I just consider that a hedge to help deal with the results of a culture in collapse.
But to your point about debt and consuming ourselves, debt by itself is not the issue, just the lack of virtue and honesty about the adage TANSTAAFL. Thus we are lacking the restraint to create excessive debt when we clearly no longer have the ability to meet the promises to repay those obligations honestly and completely. So we face either an honest default via Congressionally announced bankruptcy, or a dishonest one via devalued money and inflation, if not also coupled to violence of some form.
I don't have a very good command of all of the data details, but some of what I read suggests an honest approach might let us get by with sacrificing only 10 or 20 cents against the dollars promised, vs. 50 to 80 cents if we continue to deny and delay.
It helps if you have a constitution identifying the government as sovereign over managing the money, previously ratified by antecedents of the current population. Not too much wiggle room to set up your own, then. :-)
But weren't you (and others) also suggesting if the SHTF that ammo, food, tools, firearms, etc., plus good relations with most of your neighbors, would be more immediately useful than Au or Ag? Under that situation we revert from being the descendants of immigrants to again being "settlers" attempting to re-establish a society and a civilization.
Thanks for the post, and the opportunity to "spout off" on this topic.
Yes, the wealth of tangible assets and friends and family would be more important than gold and silver, when TSHTF. However, if you can imagine yourself in such a scenario, would you not want a modest supply of gold and silver, for negotiating purposes? Some people too might have something you and yours need, so that would help.
Just gonna drop this here. Sort of ironic that Andrew Jackson is the face of the $20. He was as anti-Fiat as they come. Like he literally dissolved the National Bank. Just … so ya know.
"Usury is money making money, instead of making money with labor or a service."
Well, it can seem that way, but reality is more complicated. And I won't do this topic justice here, but ...
1) usury is the practice of making loans and expecting/ accepting being paid back later with some agreed upon quantity of interest (right?). This is an economic transaction, so presumably each party enters into it as equal and opposite partners. The borrower is perceived to be a credit worthy recipient who, in spite of the risks inherent in life and the marketplace, seems to have a credible way and plan to replay the loan within the T's and C's to which they have mutually agreed. The lender is judged to be the proper owner of the money being loaned, whether that money actually exists with prior value (say from your brother's bank account) or comes from a bank essentially creating the money out of thin air (but supposedly under legal, business, and social restraints on how he can and should behave.) As a bank loan, and while it is transferring between bank accounts or other money "forms", it is essentially "promise money" that does not yet really contain stored value. [Perhaps the money borrowed from your brother does? But that value could eventually also be lost at some point.]
2) But the plan is to use that money to obtain or buy or create goods and services directly, so you can live and have an income of some sort, which is partly used to repay the original loan, or
3) the loan is used to obtain physical and human capital, that in turn will be used to obtain or buy or make goods and services that are sold and then have value added "real money" received in return. A portion of this "real money" is repaid to the lender as principal and a portion as interest. The original "promise money" gets eliminated (i.e., de-created back into thin air) as the principal is repaid, while somewhere a quantity of "wealth" has been created in its stead, that in turn has a life span for its value. 4) While the banker/lender also received the interest as real value payment for the various services associated with creating, administering, and accounting for that loan, and for the risk of not getting repaid due to whatever. Oh, and for their profit - that "nasty evil" thing that incentivized the whole deal in the first place. And if it had not been in prospect of eventually being received, the loan would not have been initiated in the first place.
5) clearly there are many times when one party to the transaction has more power or leverage or incentive than the other, so their "equality" is an idealized situation, that can lead to problems when there is too large of an imbalance. That does not have to be the situation for all usurious activity.
The bankers know that they will not find any support or protection amongst the people they exploit. This is why the owners of the Fed remain anonymous. Debt slavery is insidious and morally crippling, yet here we are, the 98% toiling to pay our taxes and enjoy a few years of retirement. Woodrow Wilson (income tax and the Fed) is among the greatest traitors of the American people and Andrew Jackson the greatest champion.
Once I understood the global (and US) history of money, I found it hard to understand how any Fiat currency could retain value since they are totally unhinged from gold/silver and can easily be inflated into irrelevance. The answer is simple: the government only accepts the private bank notes of the Federal Reserve to satisfy tax obligations. Everyone owes tax, so everyone needs Dollars, the private bank note of the Fed.
Just gonna drop this here. Sort of ironic that Andrew Jackson is the face of the $20. He was as anti-Fiat as they come. Like he literally dissolved the National Bank. Just … so ya know.
Just gonna drop this here. Sort of ironic that Andrew Jackson is the face of the $20. He was as anti-Fiat as they come. Like he literally dissolved the National Bank. Just … so ya know.
In exploring the topic of money from the perspective of "value accounting", I came up with the idea of a distinction between "promise money" where value is yet to be added/ stored therein, and "real money" that does contain value from some prior labor or investment or whatever. I only started to think about this after I came to understand that banks (and so governments) were legally able to create "money" out of thin air, and there did not have to be any reserves, or "hard currency" or "specie" behind it, etc. I am still struggling to figure out how we do or might allocate value in this way across economic activity, so maybe the whole scheme is flawed in some way that I do not yet see. I suspect there is an aspect of double entry bookkeeping that might help here, but that is also something that I am having difficulty getting properly installed in my neurons. I cannot believe this idea is original with me, so that ideas along this line must have already been worked up or worked out by someone smarter than me, although probably using different language or terminology.
Thanks for the mention, and the link to the podcast! It's a good article, and always happy to have another warrior against usury!
The support for 'hard money' is based upon ignoring all the problems that 'hard money' created in the life of the Republic. But, more importantly, all money is 'fiat' money. Unless you're bartering for products with intrinsic value directly between market participants, you're dealing with something that is not 'real' in the same way an orange or sewing machine is real.
All money is fiat money. It's simply a thought in your head that gold or silver is more 'precious' than some other metal (or even a piece of paper).
The only real currency is trust. When trust breaks down *no* currency works.
All true enough, though, in the event of the collapse of modernism, gold and silver coins would be treated much more precious than say, copper or steel coins. That is not merely in one's head, that is a reality of matter. Though also, no currency has any value at all unless people believe in it.
My objections to 'hard currency' has to do with actual historical failings of this form of currency when used for an entire economy. I don't object to some areas using precious metals for 'money' but I do not think that 'hard currency' is a universal panacea for the failings of allowing the wrong kind of people to control the means of currency production.
The primary problem of fiat currency isn't (temporary) over-production of currency it's *getting rid* of excess currency when it's no longer needed. This is typically where 'taxation' comes in, but the government doesn't actually destroy the money it receives but, rather just cycles it back into the economy.
I would agree hard currency is not a panacea for the excesses of fiat, however fiat seems like it is merely an excuse for elite to make for more war, as we have seen since the advent of the Federal Reserve, and especially after we went off the gold peg in the early 70's.
Obviously any currency hard or fiat can be problematic. But I'm not talking here about what society should do as much as I am about individual crisis management and empowerment.
As for what society should do for a currency, I don't feel prepared to say, though I am mindful, during the great depression hundreds of alternative currencies popped up. Something like a period of experimentation would be useful, I think. Decentralization I suspect is necessary just now, or bankers, globalists and corporations are going to effectively lock us down.
I think any future 'constitution' should include the right to mint one's own currency and offer it to the public.
Or at the very least, not allow for a privately owned fiat currency.
Respectfully, I disagree. We need to look at currency the same way we looked at the problem of internal combustion or the production of electricity. Despite 'money' having been around for thousands of years, the basic technology hasn't changed at all (and neither has the institutional framing). So, in my view, our civilization could benefit from opening up 'currency' to the same intuitive and inventive development that *other* technologies have been subject to.
Why is 'money' the only important everyday technology whose *technological development* is completely off the table?
5000 years ago a system was developed and virtually nothing has changed about since 'fractional reserve banking' was created in the late 1400s.
It's an absurd situation.
We need to desacralize monetary policy and the production of money and look at it like any other type of production process.
Just gonna drop this here. Sort of ironic that Andrew Jackson is the face of the $20. He was as anti-Fiat as they come. Like he literally dissolved the National Bank. Just … so ya know.
https://thehermitage.com/andrew-jackson-the-bank-war
I would add that Frederick Taylor and his Scientific Management movement started in 1908 and with his testimony to Congress regarding efficiency and the need to control the very movement of workers to increase yields, played a large role. It is our own brand of industrial age collectivism that Stalin praised and hoped to adopt.
https://rumble.com/v4e2xje-sunday-nights-radio-who-watches-the-watchmakers.html
Interesting. I did not know that. Yes, I suppose, that sounds like an early version of what John Dewey and Woodrow Wilson put together for America, regimented schooling for automaton cogs, for The Machine. A good recipe for eternal war.
Welcome here.
Henry Ford picked this up, spun it a bit for his "Fordism" and that his what Stalin fell in love with.
Despite their power deriving from capital markets, the industrialists at the turn of the 20th century were for collectivization and regimentation of society, but not for the altruistic reasons that Marx cited, although Ford would claim that it provided for a better life for his workers. But the key there is "his workers".
Taylor testified before Congress and in that testimony he prattled on about how he would teach the proper way to shovel. This is technocracy and hubris all rolled into a presumptive expert. I wonder what Mark Twain's reaction to that would be?
Just gonna drop this here. Sort of ironic that Andrew Jackson is the face of the $20. He was as anti-Fiat as they come. Like he literally dissolved the National Bank. Just … so ya know.
https://thehermitage.com/andrew-jackson-the-bank-war
Yes, this was noted in the article and is intentional as a sort of F-you to Jackson by the banker families who are well aware of his historical opposition to their nefarious schemes.
There is no punishment too cruel or too unusual for the banksters. They really are the spawn of demons. We need to end the Fed (and the IBS/IMF/any other central bank) the same way the French ended their monarchy.
Agreed in the main. Though we would want to check the violence, as once it starts it is hard to put it out, like a forest fire.
Good point.
I have yet to read your references. But will.
I can recommend another finance-related article: https://sashalatypova.substack.com/p/since-1997-20-trillion-has-been-stolen
After reading that I am inclined to say, DC is not a swamp, it is hell on earth. We should probably burn it to the ground and salt the earth.
What an appealing idea!
What an appealing idea!
Banks require ever more bailouts because they legally kite checks. Maturity Transformation is proper term. If banks had to use 30 year money to make 30 year loans, then the system would be stable.
New businesses of any scale need capital. If you think bank loans are usurious, check out the effective price of venture capital.
The Biblical law outlawed interest bearing loans to fellow Hebrews. Zero interest loans were the main form of charity. However, those loans were zero interest in hard money, and if you didn't pay them back, you were subject to up to 6 years of indentured servitude.
Except for student loans, we have bankruptcy as an option in the United States.
If we must have interest bearing loans, why do we need VC vultures and Central Bank families? And yes, there is bankruptcy for individuals, however, it won’t really matter once the Fed and Gov destroy the dollar, what with our runaway national debt.
No argument about the runaway national debt. If I was to run for president, it would be on the Sith Party ticket: cut government AND raise taxes. Slogan: "If you are tired of the LESSER of two evils."
Ha! I think Mr Potato Head would get more votes. Take your medicine! Though, who knows, that sith party platform gives both partisans something they want.
He would be my running mate.
And he would have his pipe.
A pipe and some round glasses looking like a cross between Trotsky, Camus and William F Buckley, lol.
For higher risk ventures, equity financing is reasonable.
I read somewhere that in Europe banks are able to do equity financing. That is illegal here.
Small scale startups for ordinary businesses are pretty much dependent on SBA loan guarantees. This gets the federal government's fingers into everything.
Some of the people who write about money and finance, etc., do understand what they are talking about, but don't always use the best language to discuss and describe what they want to say. I fear a little of that is happening here, but I am encouraged (and agree) that at the end of the essay you do say: "No money is infallible, all money comes with costs, but gold and silver are the best money. If there is WWIII, the surest wealth will be tangible assets, the only real security will be local, friends and family."
It has taken me a long time to learn/ discover what I think I know about this. (I certainly have more to learn!) There are also a lot of investment newsletter writers and other "economists/journalists" who convey the sense that they understand all of the various ins and outs around what is both a very simple and a very complex topic - especially related to banking, and to a lesser extent the various types of investment vehicles and their respective interactions. But if I don't quite understand what they are saying or explaining, I suspect they may not fully understand reality themselves, either. Language and jargon are not always our friends in this domain. [I like John Tamny's and Kevin Williamson's explanations of economics oriented to the intelligent but ignorant layman, but they avoid deep topics for that audience. I might some day hope to better understand, for example, this (cited by The Tree of Woe): https://blogs.worldbank.org/allaboutfinance/accounting-view-money-money-equity-part-i
And just FYI: two section titles from this World Bank (!!) essay are Money Is Not Debt and Money Is Equity.]
For me, money is no more and no less than the AGREEMENT to use a given physical, or abstract, or digital commodity to provide the functions of a medium of account, a store of value, and a medium of exchange. Typically governments have taken on or have taken over the role of managing a societies' money, but private versions are also available (and used quite widely if only episodically - see for example the ticket stub you use to get entry to the theater seating venue.)
In any case, the usefulness of money is so great that we will continue to use a given version of it even when it is being distorted and mismanaged, until finally it loses so much of its value as to no longer be useful, and an alternative form of money must be selected, agreed to, and used instead. [Petro-dollars, anyone!?]
Thus, the core idea or entity of interest is not "money" but the VALUE for which money is used as a surrogate (typically in lieu of a more complicated system of barter). Mismanagement of the money is the real issue, not the form of money being mismanaged. Any physical or abstract money can be mismanaged (even Au and Ag, which also have problems of not being sufficiently available to support a truly robust modern global economy - so I am a skeptic about using them, although possibly a basket of commodities might be able to perform an equivalent role to retain a "sort of stable value"?)
Thus we really need an accounting system that focuses on "Value". Locke suggested someone accessing a portion of "nature" that no one else possesses or "owns" could create "property" by applying their human mental and physical "labor" to it (hand axe, Si wafer, etc.). This property then contains the value of that labor, as a minimum (perhaps). But value is SUBJECTIVE; and what is worth a day of one person's labor might or might not be viewed as equally valuable by someone else. This is the stumbling block when Marx came along and tried to use the same Labor Theory of Value, which proved deeply flawed since labor is typically only a modest component within industrial production and the value ascribed to the final end product on the retail shelf. [Capital is also "previously captured" labor, and more, but I won't dwell on that side topic here.]
Perhaps in a pre-Fiat monetary system, money was a store of value (until it wasn’t). Fiat money is most certainly not a store of value and was never intended to be. It is useful because it’s easy to exponentially multiply, making it extremely liquid and plentiful. The theory is that more money sloshing (being loaned) around the economy stimulates the economy; although all it really does is inflate prices of securities, real estate, wages, and everything else. Technically the prices aren’t increasing, the value of the fiat is decreasing. Anyways, the more you create the more interest you can generate on loaning it out, thus enriching those who are “creating” it (the central bank). So the Federal Reserve creates money to purchases debt from the US gov (and others), and reaps the interest. Insane.
To continue our drinks while addressing a couple more points, with which you hopefully do agree - but it is ok if we don't. :-)
In reference to "demand", John Tamny points out that before there can be any economic demand (rather than a noneconomic and ineffectual desire), someone [the demander/buyer] has to produce something. This seems counter intuitive until you recognize he means that until you produce something to trade in the marketplace (goods, services, skills), you have no way to pay for what you desire and thus cannot achieve an economic "demand" transaction. Same for the other party [arrowheads for baskets, or arrowheads for shells and then shells for baskets = same difference = the shells lubricate but don't fuel the transaction]. I believe John cites Ricardo or Adams as presenting this idea initially? This is part of the "not so clear" meaning behind "supply-side" economics.
Some years ago I explored what MMT was about, and came across this item by Cullen Roche in 09/07/2011: http://pragcap.com/mmt-critique A Critique of MMT From the MR Perspective; The following is a constructive critique/criticism of Modern Monetary Theory from the view of Monetary Realism.
Setting aside any absurdities about MMT, Cullen provided a thought that I found helpful: money has to be created and then distributed before it can be used. Initially he proposed the Fed created the money as a "vertical" action in the market; and then the banks distributed it as a "horizontal" action in the market. I think he (here or later on) revised his view about the Fed being the largest creator of money and recognized that the commercial banking sector was, both as creator and distributor. It is their discipline to identify and lend only to presumably creditworthy borrowers that provides some checks on the excessive creation of money, as they fail to receive interest on failed loans. The Congress (constitutionally) and the Fed also create money, but too often without benefit of a profit/loss discipline. Now some forms of infrastructure spending are worthy and it is acceptable to place our children and grandchildren under obligation to repay those loans since they are also beneficiaries of said infrastructure. But since we don't have any form of balanced budget requirement in the constitution (as difficult as that might be to do well), the feckless politicians pump out money to buy votes from greedy undisciplined and unvirtuous citizens.
I am still fuzzy on exactly how and what role reserves play in all of this, for both the commercial and the Fed bank sectors, and if there really are any meaningful legal restraints or not, or we just pretend that there are involved and controlling somehow?
I suspect this conversation would be better held across the lunchroom table at the Foundation's cafeteria, while we each drink our beverage of choice. :-) I agree and disagree with parts of your reply.
The abstract nature of thinking about money as an "agreement" means we have to pretend it carries meaning and content, essentially totally of our own making and not (strictly speaking) related to any physical content or object outside of us. This can be a difficult idea to adopt when we have been reared on economics ideas that claim more for money than is there. [I had my two semesters of econ in college prior to when Nixon took the US off of the gold standard in 1971. I don't recall, but I probably passed, at best, with B's, or maybe a C. I fear my mind was not aligned to a lot of what was presented. Move up to 1974 and I learned from a Howard Rush investment newsletter about inflation being a solely monetary result, prices increasing as the value of the "money" decreased. Thus I fully agree with you on that view of things, to the point that I cringe when I see comments or statements that conflate price changes (increases) that can be (fully or partially) allocated to real marketplace supply and demand changes, as that "by itself is not inflation -- really!" (i.e., when defined correctly). It confuses two different economic actions of supply/demand and money supply adjustments [where money is a pretend participant whose supply should on be created per the following.]
The idea that "that more money sloshing (being loaned) around the economy stimulates the economy" appears to have come from Keynes (or someone earlier?), but he/they got it wrong. This view thinks of money (that pretend entity) as providing the "fuel" for the engine of the economy (via "demand", whereas in reality it is simply the "lubricant", in the form of available "capital" (or money capital surrogate until converted to physical/mental capital) to support the growth expanding ideas from innovators and entrepreneurs. These in turn increase productivity and the cycle can continue (as in Silicon Valley) as long as there is sufficient money capital being made available from VCs and banks, etc. It is clearly a tricky balancing act to match the quantity of money/capital required to support the available growth enhancing opportunities, but not too much money, or inflation results as you state, and we end up with "too much money chasing too few goods".
The Foundation Cafeteria is a place where open and honest discussion about the future of the human race is encouraged. An apt setting to engage with fellow Foundationers on topics such as this.
You are spot on about my Keynesian allusion, it is bullshit. I agree that MMT is inadequate, and am personally more in alignment with the Austrian principles. You are clearly more versed than I on these matters as evinced by your analysis, and I am unfit to further develop these abstractions.
Of course money has to be created and distributed before it can be used, just as food has to be gathered and prepared before it can be eaten. My problem is the top-down system of money creation where those that create it (central bank) and those who initially receive it (commercial banks/gov contractors) are enriched at the expense of those downstream, because the incessant increase in the money supply without a corresponding increase in growth equals inflation. Always at the expense of the wage earning class.
" You are clearly more versed than I on these matters as evinced by your analysis, and I am unfit to further develop these abstractions."
I am not sure that is true. These ideas are both "simple" and (being abstract) complicated for some people to recognize - but not hard to understand once they grasp the fragility and nebulousness of "money" when seen this way.
"Of course money has to be created and distributed before it can be used..." but many of the things we "just accept" can also cause amazement when they are obvious but never stated explicitly -- until they are. I understood about mints and printing of currency, but strictly that is only the creation of two forms of the medium of account, while the agreement to grant that authority to that agency or bank to do so is the "hidden" factor we don't always recognize.
"Always at the expense of the wage earning class." And yet, as a form of money capital ahead of being used for purchasing physical and mental capital, it is also necessary for an economy to grow. Yes, it can be abused, and I suppose some regulatory adjustments might help keep the balance between the need for money and the supply more closely aligned - but I am not quite sure yet just what they might be. :-(
And we both know that sometimes a comment thread is not the best or easiest way to explore these ideas. :-)
I am no expert on how to set up a proper currency, but human nature being what it is, a society with a currency based on debt will eventually consume itself, as the West is. As to gold and silver, I just consider that a hedge to help deal with the results of a culture in collapse.
But to your point about debt and consuming ourselves, debt by itself is not the issue, just the lack of virtue and honesty about the adage TANSTAAFL. Thus we are lacking the restraint to create excessive debt when we clearly no longer have the ability to meet the promises to repay those obligations honestly and completely. So we face either an honest default via Congressionally announced bankruptcy, or a dishonest one via devalued money and inflation, if not also coupled to violence of some form.
I don't have a very good command of all of the data details, but some of what I read suggests an honest approach might let us get by with sacrificing only 10 or 20 cents against the dollars promised, vs. 50 to 80 cents if we continue to deny and delay.
It helps if you have a constitution identifying the government as sovereign over managing the money, previously ratified by antecedents of the current population. Not too much wiggle room to set up your own, then. :-)
But weren't you (and others) also suggesting if the SHTF that ammo, food, tools, firearms, etc., plus good relations with most of your neighbors, would be more immediately useful than Au or Ag? Under that situation we revert from being the descendants of immigrants to again being "settlers" attempting to re-establish a society and a civilization.
Thanks for the post, and the opportunity to "spout off" on this topic.
Yes, the wealth of tangible assets and friends and family would be more important than gold and silver, when TSHTF. However, if you can imagine yourself in such a scenario, would you not want a modest supply of gold and silver, for negotiating purposes? Some people too might have something you and yours need, so that would help.
Just gonna drop this here. Sort of ironic that Andrew Jackson is the face of the $20. He was as anti-Fiat as they come. Like he literally dissolved the National Bank. Just … so ya know.
https://thehermitage.com/andrew-jackson-the-bank-war
"Usury is money making money, instead of making money with labor or a service."
Well, it can seem that way, but reality is more complicated. And I won't do this topic justice here, but ...
1) usury is the practice of making loans and expecting/ accepting being paid back later with some agreed upon quantity of interest (right?). This is an economic transaction, so presumably each party enters into it as equal and opposite partners. The borrower is perceived to be a credit worthy recipient who, in spite of the risks inherent in life and the marketplace, seems to have a credible way and plan to replay the loan within the T's and C's to which they have mutually agreed. The lender is judged to be the proper owner of the money being loaned, whether that money actually exists with prior value (say from your brother's bank account) or comes from a bank essentially creating the money out of thin air (but supposedly under legal, business, and social restraints on how he can and should behave.) As a bank loan, and while it is transferring between bank accounts or other money "forms", it is essentially "promise money" that does not yet really contain stored value. [Perhaps the money borrowed from your brother does? But that value could eventually also be lost at some point.]
2) But the plan is to use that money to obtain or buy or create goods and services directly, so you can live and have an income of some sort, which is partly used to repay the original loan, or
3) the loan is used to obtain physical and human capital, that in turn will be used to obtain or buy or make goods and services that are sold and then have value added "real money" received in return. A portion of this "real money" is repaid to the lender as principal and a portion as interest. The original "promise money" gets eliminated (i.e., de-created back into thin air) as the principal is repaid, while somewhere a quantity of "wealth" has been created in its stead, that in turn has a life span for its value. 4) While the banker/lender also received the interest as real value payment for the various services associated with creating, administering, and accounting for that loan, and for the risk of not getting repaid due to whatever. Oh, and for their profit - that "nasty evil" thing that incentivized the whole deal in the first place. And if it had not been in prospect of eventually being received, the loan would not have been initiated in the first place.
5) clearly there are many times when one party to the transaction has more power or leverage or incentive than the other, so their "equality" is an idealized situation, that can lead to problems when there is too large of an imbalance. That does not have to be the situation for all usurious activity.
The bankers know that they will not find any support or protection amongst the people they exploit. This is why the owners of the Fed remain anonymous. Debt slavery is insidious and morally crippling, yet here we are, the 98% toiling to pay our taxes and enjoy a few years of retirement. Woodrow Wilson (income tax and the Fed) is among the greatest traitors of the American people and Andrew Jackson the greatest champion.
Once I understood the global (and US) history of money, I found it hard to understand how any Fiat currency could retain value since they are totally unhinged from gold/silver and can easily be inflated into irrelevance. The answer is simple: the government only accepts the private bank notes of the Federal Reserve to satisfy tax obligations. Everyone owes tax, so everyone needs Dollars, the private bank note of the Fed.
Just gonna drop this here. Sort of ironic that Andrew Jackson is the face of the $20. He was as anti-Fiat as they come. Like he literally dissolved the National Bank. Just … so ya know.
https://thehermitage.com/andrew-jackson-the-bank-war
Just gonna drop this here. Sort of ironic that Andrew Jackson is the face of the $20. He was as anti-Fiat as they come. Like he literally dissolved the National Bank. Just … so ya know.
https://thehermitage.com/andrew-jackson-the-bank-war
In exploring the topic of money from the perspective of "value accounting", I came up with the idea of a distinction between "promise money" where value is yet to be added/ stored therein, and "real money" that does contain value from some prior labor or investment or whatever. I only started to think about this after I came to understand that banks (and so governments) were legally able to create "money" out of thin air, and there did not have to be any reserves, or "hard currency" or "specie" behind it, etc. I am still struggling to figure out how we do or might allocate value in this way across economic activity, so maybe the whole scheme is flawed in some way that I do not yet see. I suspect there is an aspect of double entry bookkeeping that might help here, but that is also something that I am having difficulty getting properly installed in my neurons. I cannot believe this idea is original with me, so that ideas along this line must have already been worked up or worked out by someone smarter than me, although probably using different language or terminology.