Muirgeo, in a comment to this post, writes:
Separation of church and state is important (though slipping) and
likewise we’d do good to cast a law that keeps a wall between private
money and politicians. Until then we’ll continue along in a corporate
state that privatizes profits and socializes debt.I understand the desire to let the markets be free but the markets
themselves have no such desire to be so. They love governmental access.
It needs to stop.
I totally agree. There are two ways to reduce the connection between politicians and money. One is to reduce the role of money. The other is to reduce the role of politicians. I choose the latter. I contend that reducing the role of money of politics in order to make politics more honest is like trying to make airplanes safer by reducing the role of gravity. Let’s get money out of politics by making politicians less powerful.
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Russ says:
"Let's get money out of politics by making politicians less powerful."
Sure, lets start with term limits.
Russ also says:
"The other is to reduce the role of politicians. I choose the latter."
I choose the latter too… The problem can be summed up by a quote from John Templeton in early 2004:
"All currencies, not only the American dollar, but all currencies, always go down, mainly because of democracy. The voters will vote for a person who is going to spend too much, and so you have to expect all currencies to go down."
It's all about personal responsibility. Unfortunately I see that character trait going the way of the Dodo.
Yep. The belief that money can be separated from politics demonstrates a failure to understand the nature of the political class.
See Muirgeo only sees half the problem. He sees the issue being the private money and not the politicians.
There was a great piece written a while back, and I am remiss for not remembering the author or title, but he/she talked about the public condemnation of those that offer bribes when we should be more worried about the fact that the people in power accept the bribes in the first place.
The solution to getting money out of politics is to change the incentives faced by lobbyists. To do that, the power that the government wields MUST be reduced greatly to make lobbying inefficient.
Anything else is simply going to encourage more private money interaction in a 'public' system.
The main point to me is that the issues of economics are ultimately issues of political philosophy. Too often it seems economist want to stick to their expertise of economics as if it can live in isolation of a political milieu. Libertarianism can be made to sound great but how do you get there from here?
Aristotle wrote that “Money exists not by nature but by law.”
I believe this to be true. Thus money and the economy are a subset of law.
Money requires laws. Laws require legislation.
So how best to legislate? An elite minority or an equal democracy? I think this topic has been discussed by a few greater minds then my own over several thousands of years with no definitive solution as of yet. But if I look to societies through time as going through a natural selection process of survival of the fittest I don't see any existing successfully with a minimalist government set up. I see the most successful societies as those that are governed by democracy. And I'd say the greater degree of equality of democracy the more successful the economy and the liberty of the given society.
I just don't see how you can restrict the legislative process. It has to be an evolving process. The key is too keep it an equal democracy ( and I'm not equal outcomes). Currently monied interest are, IMO, undermining both the legislative process creating unequal democracy and fixed non-competitive corporatist economies. If you had a minimalist government eventually monied interest would get to it and mold it to their needs.
Maybe the classic liberal society is a higher order of societal evolution yet to be achieved in a distant future. (I would argue it's a dead end species that had existed in the past but didn't survive natural selection). But the question needing to be answered is just who is going to make the basic set of rules that will transition us and define this society. Who is going to make these rules so perfect that they never need re-writing or evolving?
I find the separation of church & state issue interesting, also, because, after being introduced to Robin Hanson's ideas, I've begun to see them both as religious endeavors, at least in their current forms. In our society, they both involve self-identity and loyalty to an in-group which holds a peculiar set of moral ideals. When the in-group feels powerful enough, they start trying to push their ideals onto people outside their groups. The advantage that the state has over a church as a religious vehicle is it's power over the rules & the police that enforce them.
Politics is always about power struggles between groups, but as long as identity politics influences government more than the limits described in the constitution, then it's really just about religious identity groups fighting over who gets to make the rules. In this context, separating church & state is a misnomer. It's just a sectarian battle.
"All currencies, not only the American dollar, but all currencies, always go down, mainly because of democracy. The voters will vote for a person who is going to spend too much, and so you have to expect all currencies to go down."
Posted by: Babinich
I call baloney. Our currency is not faltering because the democratic desires of the people being represented. The dollar and our economy is in critical condition because Wall Street had it's ever whim addressed by their money buying politicians and the Fed. We've had a lack of democracy and that has been the problem.
This may be perverse, but I think the more controls you put in place to keep money out of politics, the more important money becomes.
Really, the people with the most sway are those that can direct a whole bunch of people to give money to candidates. Union bosses, corporate heads, campaign finance "wranglers" are more powerful now because individuals are more limited in their giving.
See Muirgeo only sees half the problem. He sees the issue being the private money and not the politicians.
Posted by: The_Chef
Chef,
The church would love to get more involved in politics. The government in theory could write laws that would benefit the churches and the politicians writing those laws but the First Amendment has worked to stop its undo influence of our government. Qualifier: I think enforcement has been a little lack as of late. Many churches should have lost there tax exempt status and many politicians should have been indicted for violating the constitution but generally it has worked.
Aristotle is wrong!
Muirgeo,
Democracy in theory is every person having an equal say in how everyone has to live.
Democracy in practice is a political class ruling an uninformed and generally frightened population via a cycle of propaganda leading to control of resources which are then used to generate more propaganda and more resources…
I know you think you want more Democracy, presumeably in its theoretical sense, but the only only type of "Democracy" that you can actually have is the type under which you are controlled and manipulated by a self interested political class. You talk to us as if we're the cause of the problems you observe. We're not. You are. You are a member in good standing of the uninformed and generally frightened population.
Muirgeo – responses to two of your posts.
As to the first, let's compare a fairly minimalist state (the US in the nineteenth century) with a far more intrusive state (the US in the twentieth century). By any rational measure, the nineteenth century was far more successful.
The standard of living rose by a higher multiple; the technical achievements and rapid translation to everyday life were unparalleled, we abolished slavery and extended the franchise to all males (with women added soon after century's end), our foreign war involvement was minimal compared with the 20th century.
The twentieth century had its successes as well, but fewer. There were bloody wars in both centuries, but not as many in the nineteenth. Although the business cycle resulted in various recessions ("panics" as they were then known)in the 19th century, there was nothing as prolonged and damaging as the depression of the 1930's.
Further, it was more democratic than the current system. That's because it lacked the enormous body of unelected administrative officials that make far more law now than actual elected legislatures, and whose powerful decisions are largely insulated from judicial review.
So the current system is a bureaucratic state with only attenuated democratic oversight. My own experience in dealing with administrative decisionmakers is that their decisions are often antithetical to the official positions of the elected chief executive, but they are too protected by civil service rules and multiple layers of supervision to be subject to effective restraint.
In fact, I would modify Prof. Roberts' desire to restrain the power of politicians: I would let them do whatever they tnink best, except delegate any authority to bureaucrats.
As to your second point about why the money supply is inflated: The overwhelming mass of government spending is spent on lower class and middle class entitlements. Very little is spent on big corporations or the rich, relatively. Inflation is caused by spending more than you tax. I guess you could argue that the rich benefit because we could tax more instead of inflating, but it's really incontestable that spending has gone up enormously over the last 75 years, and goes up more and more each year.
I know that you are heavily committed to your political perspective, Muirgeo, but surely you are grown up enough to realize that the constant inflation over the past 75 years has been the result of basic policies, and not some Wall Street manipulators (who, by the way, were the favorite villains of 1930's era right-wing populists).
"Aristotle wrote that “Money exists not by nature but by law.”
I believe this to be true. Thus money and the economy are a subset of law.
Money requires laws."
This is just bad philosophy, and there IS a distinct difference between political philosophy and economics, you just don't see it. Political philosophers usually make pretty crappy economists, and Aristotle is case in point. He failed to understand the time value of money, and thus did not understand the value of capital. Not to mention that his concept of money was the only one provided in his lifetime.
Money originally came about from private means. No state or law can decree that 'this piece of green paper is money', or 'this piece of metal is now money'. It doesn't work like that. Usually, private citizens engage in trade, and need to find a medium of exchange. This medium of exchange usually happened to be gold. It wasn't always, in the Nazi concentration camps, it was cigarettes. No laws made cigarettes money, they were valued by most individuals for their intrinsic value, this then gave it value as a medium of exchange, which also gave it value to those who did not smoke cigarettes.
Paper money can only come about via government intervention, history backs up this point. In order for a government to pull this trick on its people, they have to come up with a reason for people to accept this paper money, thus taxes would only be accepted in this new paper currency.
Money is not created by laws. It is created by a free society choosing whether or not to accept this or that as a medium of exchange. As quickly as government forces its paper upon its citizens, its citizens can reject it.
Laws require legislation.
Not true.
So how best to legislate? An elite minority or an equal democracy?
This is a false dichotomy. You don't understand what that means, though.
Our dollar is in decline and has been for a long time because humans are so suseptible to the feel good irresponsible dictates of "muiroslowosophy" which is a way of thinking that to the mentally retarded seems full of truth and promise.
Muiroslowosophy advances such principles as "no need to educate oneself, government will provide", "evil capitalist will be stripped of their ill-gotten gains and said stolen wealth distributed among the uneducated and unwilling", and "sitting on your ass holding hands and singing Kumbaya is more worthwhile than making an effort to create wealth in a free market."
Move over Aristotle!
The church would love to get more involved in politics.
So what? Who are you to decide which entity is entitled to be a part of the political process and which isn't?
There should be a separation of Unions and Politics.
Mother Nature was seeking reelection. To secure the squirrell-vote, she promised a bumper harvest of nuts. To secure the wolf-vote, she guaranteed abundant prey and sport. To secure the deer-vote, she promised safety and wide green fields. To secure the snake-vote, she guaranteed plenty of mice and long warm summer days. And so on…
On election day Mother Nature won in a landslide victory. The whole forest came out to cheer and honour her, and it was a day of great celebration. She now occupied the most prestigious and powerful position in nature, and would be revered by all the forest.
However, shortly into Mother Nature's new term the deer approached her with a complaint. It seems that they were not living in safety at all, but being preyed upon by wolves. Mother Nature explained that there was nothing she could do, since she had also promised the wolves abundant prey. One after another, the animals in the forest came forth with complaints, each confronted with the bad news.
Eventually the animals organised an uprising to depose Mother Nature. Backed into a corner, with the entire forest out for revenge, Mother Nature decided to change her policies. She reasoned: although not every group can have what they want, perhaps I can get some of them, like the wolves, to fight for me if I give them what they want, the deer.
And so it was done. The forest erupted into a civil war, with Mother Nature leading an army of ferocious beasts. After heavy loses on both sides, Mother Nature was victorious, and brought tyranny to the forest. There were no more elections. When asked later whether she regreted what had occured under her reign, she would only answer 'if only I had more power then things would have been better'.
"Monied Inerests" are not the only problem. Sure, politicians have an incentive to make them happy. But, they also have an incentive to make blocks of voters happy. Social Security and Medicare are in their current states largely because of the desire of politicians to appease senior citizens, a powerful voting block. FDR never imagined a program that would provide for the everyday needs of a significant portion of the population.
Politicians are individuals. Money is not. If "money" here describes uncommonly wealthy people, then the statement presents a false choice, because uncommonly wealthy people are themselves politicians definitively.
A politician isn't simply the winner of a majoritarian plebiscite. Politicians exist throughout history without these plebiscites, and we'd still have politicians if we did away with the plebiscites.
Politicians are people entitled to make decisions organizing resources. Money is a record of entitlement to consume or invest. The principal difference between a market capitalist and an authority elected in a majoritarian plebiscite is the process whereby he obtains his authority and the extent of his authority to exercise it.
Majoritarian politicians win popularity contests entitling them to raise taxes. Capitalists also win popularity contests, but a single capitalist need not please half the population, only enough of the population to sustain a profitable organization.
There is no fundamental reason why the authority of capitalists elected by free laborers, consumers and investors in markets should not be limited by some authority less centralized than a legislature and an executive bureaucracy with the power to tax. A progressive consumption tax is one model for such an authority. This tax distinguishes entitlement to consume from entitlement to invest, and juries hearing tax evasion cases effectively make the distinction.
If we're really serious about leaving more authority to organize resources in the hands of decentralized authorities selected by markets, we'll consider reforms of this type. If we're only cheering for one group of politicians or another as they vie for authority, invariably trading entitlements rights among themselves, we'll continue pushing "the Laffer curve" and similar rhetorical innovations whereby one group of politicians agrees with another group of politicians that both groups shall have more entitlement to organize resources for their exclusive use.
Trade unions are just one variety of business corporation. Why single them out?
Religion is nothing but people with like minded opinion about the nature of God, or even the same goal – salvation. Unions is a cartel of workers with similar goals. Why single out religion? I was trying to be ironic.
Aristotle is wrong!
Posted by: Oil Shock
So you simply do all your business via truck and barter? Interesting! How's that going?
Singling out religion isn't even the issue, IMO. cutting any group out of the political process is immoral and impossible. However, limiting government so that it is unable bestow favours on any group is much more realistic. Whether it will happen or not is a different question.
The church would love to get more involved in politics.
So what? Who are you to decide which entity is entitled to be a part of the political process and which isn't?
Posted by: Methinks
And who are YOU to decide? Ideally we are 1/300,000,000th of a vote each.
"If you choose not to decide you still have made a choice." Rush (not Limbaugh)
And who are YOU to decide? Ideally we are 1/300,000,000th of a vote each.
Yes, genius. that's what I was getting at – nobody has the right to decide who gets to participate in the political process.
The "time value of money" is a statutory artifact, and money typically has no time value in fact. If you think it does, just bury a hundred bucks in your backyard for a decade and report to us the effect on your value.
Don't go buying Treasury securities. They're not money (and they're not capital classically either). A sufficiently powerful state can promise you more entitlement to consume in the future than you possess currently by promising to seize the produce of others. If that's the "time value of money", I don't dispute it, but I won't call it "the value of capital", because I reserve this term for something more useful.
Capital is a means of production. Capital enables a productive organization to add value to productive inputs. As long as the capital is durable, it might add value roughly proportional to the duration of its employment, but real capital typically depreciates. Tools become old and obsolete for example.
Money is not capital in my way of thinking. In a capital market, money is a momentary record of the value of capital. Confusing money with capital is like confusing a yardstick with a yard of cloth or even confusing the yard itself (abstracted from the stick) with the cloth.
Money is a record of credit from an exchange. I give you a gallon of milk. Rather than returning something of comparable value, you return documentary evidence that I have parted with this value. I am then entitled presently to something of comparable value elsewhere in the market. You possibly obtained the entitlement similarly, but people obtain these entitlements in many different ways.
I may give you the milk and accept this document in leiu of barter only because the milk is first my property. That the milk is my property is a matter of law. The money is an accepted record of the exchange of lawful property. Property is not simply a matter of free people agreeing. This idea is hopelessly utopian. The state of nature involves continual clashes among actors vying forcibly for possession of resources, and the artificial states of human civilization are no different. That you like one set of forcible proprieties or another doesn't make them less forcible.
In reality, the monetary tokens signifying credit are created by states enforcing debts, including the obligation to pay taxes. The chartal theory of money actually describes the money I observe practically everywhere I go. That's just a fact. It's not an ideological assertion. It's an observation. Even under various gold standards, gold was not identical with money. Gold only had a fixed price. There was never any one-to-one correspondence between records of credit and bits of gold somewhere, and there couldn't possibly be. Any effort to limit credit this way forcibly is doomed to failure and can only harm markets.
Muirgeo’s quoting Rush now. Absurd.
You can choose from phantom fears
And kindness that can kill
I will choose a path that’s clear
I will choose freewill
So Mesa when you go fill up your car I'm guessing you will use your free will and choose between premium and regular…. good job mate. How liberated you must feel.
"The "time value of money" is a statutory artifact, and money typically has no time value in fact. If you think it does, just bury a hundred bucks in your backyard for a decade and report to us the effect on your value."
You obviously have never worked in finance, or understand even rudimentary principles of finance. The time value of money refers to the fact that I would rather receive $100 today, rather than $100 next year. If I give up using that $100 now, I will need to be reimbursed with a greater sum a year from now, to make up for my giving up that $100 in consumption at that earlier time. I most likely am giving up that consumption in order to 'put my money to work', and invest in a productive entity that will provide me with returns on that money. That is how savings is then used for capital in the classic Hayekian triangle. To ignore the time value of money is to ignore a major premise of capitalism and its workings.
"Money is not capital in my way of thinking. In a capital market, money is a momentary record of the value of capital. Confusing money with capital is like confusing a yardstick with a yard of cloth or even confusing the yard itself (abstracted from the stick) with the cloth.?"
I never said money was capital. Money is a unit of exchange. Capital, and all other goods for that matter, are usually measured in this unit of exchange. But that does not take away from the fact that understanding the time value of money is essential to understanding the function of capital. Because you dismiss the time value of money as a 'statutory artifact', you misunderstand the role of capital in society, and this rather common lack of understanding leads to justifications for socialism, which seem to be pretty standard in your posts.
"Money is a record of credit from an exchange."
No, not really. Maybe in this temporary era of paper money, you are right, but this is an anomaly, rather than the way things normally are. Money is a unit of exchange plain and simple. The fact that it may or may not be a record of credit is moot, that is not the distinguishing feature. The distinguishing feature is that it has a certain value among market participants and is accepted for purposes of exchange.
"Property is not simply a matter of free people agreeing. This idea is hopelessly utopian. The state of nature involves continual clashes among actors vying forcibly for possession of resources, and the artificial states of human civilization are no different."
I always find it ironic just how much more confident libertarians are in human nature than statists. We allow for things like greed, lust, etc., and realize the 'human condition'. But it is the statists who proclaim that, 'without the state, life will be nasty, brutish, and short'. The state does not have a monopoly on cooperation, only on violence. Black markets are rampant, and people voluntarily agree to contracts within those markets without the state lording over their transactions.
Your totally incorrect vision of capital and money leads you to make totally absurd statements, like comparing a politician to an entrepreneur. I don't even want to get into how totally stupid that comparison is, it'll just aggravate me. Life is too short.
Yeah, the world is full of two types of people: naive idealists and libertarians. Just an example of the some old line.
-Communism works, we just haven't found the RIGHT country in which to try it (or the RIGHT planners, citizens with the RIGHT priorities).
-The Welfare Democracy works, as long as we find the RIGHT politicians.
Acton had it right:
"The danger is not that a particular class is unfit to govern. EVERY class is unfit to govern."
The "time value of money" is a statutory artifact, and money typically has no time value in fact. If you think it does, just bury a hundred bucks in your backyard for a decade and report to us the effect on your value.
you will be able to buy fewer goods with it than you will today. "Time value of money" opportunity cost. All else held constant, you would prefer to receive a fixed amount today than at some point in the future. This is similar to the exchange we had about you receiving payment for the widget you sold me today rather than extending credit to me for the purchase. Given the choice, you would prefer payment today because of the time value of money. Because you can invest the money I give you today into your widget making business (or something else), you would prefer to have it today. If you allow me to take your widget home today and pay you over time, you will also require that I pay you for the time value of money (you'll charge me interest).
So Mesa when you go fill up your car I'm guessing you will use your free will and choose between premium and regular…. good job mate. How liberated you must feel.
Once again, George – you are not compelled to drive. This is your choice. If you want your kids to go to soccer practice in a rickshaw, you could choose that. I don't know how many times you'll have to read the same thing over and over to understand it, but experience leads me to believe that number is infinity.
Offhand, I can't think of a single thing I would not want separated from politics.
Right. So I suppose something else has the time value.
I'd rather control an entitlement to consume or invest over a given period than not to control it, because this control is valuable. That's right. Interest is more than this opportunity cost though. It's more of a risk premium.
I might prefer payment today because I might miss an opportunity to employ the entitlement between now and the time you pay me. That's true.
I don't invest money in my business. I invest things I purchase. Money is a record of my entitlement to purchase things. This point may seem pedantic, but it's critical to understanding the role of money in markets.
Well, I'm charging you for the lost opportunity to exercise an entitlement, but I'm not sure I'm charging you for the money. I also lose the opportunity to employ the widget myself, so we might speak of the "time value of widgets" as well. This usage makes a lot more sense to me than "time value of money", because holding the money itself typically is not valuable, even if the opportunity to spend it is. Am I charging you for my lost opportunity to use the money or my lost opportunity to use the widget?
Furthermore, since money is only a record of my credit to you, I don't need currency from you to exercise the entitlement. I expect you to pay me, and I can bargain with this expectation. My record of accounts receivable, if trusted by others, is negotiable. Essentially, it is money. You made this point yourself. Extending credit to you without an exchange of bank notes deprives me of an opportunity to invest only insofar as others trust some banker's note more than my record of accounts receivable.
Since my record of accounts receivable essentially is money, the idea that all money must correspond to gold in a vault or some other commodity somewhere is absurd. Money must account for the value of everything traded over time, not only the value of gold in vaults. This point bears repeating, because many people, particularly people in this forum, clearly accept the identification of money with some commodity like gold. Money is not at all like a durable commodity. Money obeys no conservation law. It spontaneously appears and disappears continuously, whenever people exchange indirectly.
Russ,
You wrote:
I'm reminded of a contrary quote:
"A belief in "limited government" is as naïve as believing that one can place a large bowl of candy in front of a group of young children, direct them to take only "reasonable" amounts, and expect the contents of the bowl to be only minimally reduced by day’s end."
– Butler Shaffer
b.t.w. – I just read you new book and thoroughly enjoyed it.
I know what they mean by "time value of money", but I always thought it should be "money value of time".
Or possibly you don't understand rudimentary finance. I understand how people presuming to describe finance often describe it, but I may describe it differently here.
I haven't denied this preference. I've only called it a statutory artifact. I'd rather have $100 today than $100 next year, in no small measure, because I expect to consume less with $100 next year. Most libertarians agree that inflation is a statutory artifact. Don't you?
No, it's not the earlier consumption. As Methinks says, it's more the opportunity to employ an entitlement to invest over a period. Earlier consumption isn't necessarily any more valuable than later consumption, even if I'm consuming the same real value at both times. What I lose by consuming or investing now rather than later is the option of consuming or investing otherwise between now and later.
No, you don't earn returns on money. You buy something with the money and earn the marginal value of what you own for the time that you own it. You earn a return only by ridding yourself of money. This point bears much repetition.
Well, that's how we account for capital in monetary terms.
It's not the time value of money. That's a misnomer. It's the marginal value of capital. If we imagine that money itself has value, we're subject to the illusion that statesmen may produce as much value as they like simply by expanding the nominal supply of money.
I never said you said it.
Money is a record of exchange, yes. A unit of currency measures a unit of current, market value, and we record these values. That's money. We could do it all in accounting ledgers in principle.
We measure the relative value of capital this way. I agree.
Capital has a marginal value, and durable capital has this value over time. That's true enough. We should not confuse this value with a value of money though. The value of a hammer is not the value of two dollars any more than it's the value of four dollars or eight dollars. I might pay any of these prices for the same hammer.
The very idea that "four dollars" has a value is a misconstruction. "Four dollars" is a value. Three feet is the length of a yard stick, but three feet is not the length of a yard. Rather, "three feet" is a synonym for "a yard". We might as well say that three feet is the length of three feet. What use is that?
I don't dismiss it this way. I describe it this way.
No. I understand the role of capital in society. I don't confuse the role of capital with the role of money. That's what you're doing.
Nonsense. The problem here is that you don't know the meaning of "socialism". Where do I advocate central planning? I advocate it less than most of the nominal "libertarians" here in reality.
Yes, really. Much money has always existed primarily on paper or in similar form. Paper money is nothing new. Money also existed on clay tablets or, more precisely, as little indentations in clay tablets signifying credit extended. Gold has the benefit of durability, and it's difficult to counterfeit, but as money, it's still primarily a recording device.
True enough. It's a record of exchange, a measurement of value exchanged, and it has units.
No. It's always a record of credit. As a commodity, gold itself is never money. It's a thing with a value that can be measured monetarily in a market.
That's right. It must be accepted as a record of credit to be money, but it can't only be a record of an obligation to exchange gold or some similar, durable good, because we want to exchange values far exceeding the value of all the gold on Earth, and the values we want to exchange are continually in a dynamic state of flux. Sometimes, we want to exchanges things that disappear almost as soon as we exchange them.
I don't know which straw man you're describing here, but I nowhere ever suggest that life is nasty, brutish or short in the state of nature. I like the state of nature myself, but I can't deny that people typically live longer in artificial states. I don't observe anyone anywhere living very long in an "anarcho-capitalist" utopia, because these states are imaginary. The system isn't stateless, but it is imaginary.
A state is a monopoly of lawful coercion by definition. Cooperation occurs within constraints imposed by this coercion. All systems of property whatsoever fit this pattern. I can't meaningfully favor property and oppose coercion, so I don't bother pretending to oppose coercion absolutely.
Well, if you want to do all of your exchange without any right to call upon the uniformed, armed men to enforce your rights, you can do that. You don't behave so though. Do you? You actually collect the records these men expect to see before they'll enforce your rights, particularly their bills of credit. Don't you? The problem with this utopian idea is that you don't mean what you say at all.
Here again, you waste much space addressing your own absurdities. I've not compared a politician to an entrepreneur. I compared politicians to uncommonly wealthy people. I've known lots of entrepreneurs over the years, and very few of them are uncommonly wealthy, so the confusion is yours and not mine. You've confused entprepreneurs with uncommonly wealthy people. Why would you do that?
"My record of accounts receivable, if trusted by others, is negotiable. Essentially, it is money."
It is only money if it is recognized by the counterparty as acceptable. Credit is NOT money. It can be, but it is most certainly NOT money if the credit-worthiness of the recipient is questionable. Case in point, the current mortgage crisis.
"Confusing money with capital is like confusing a yardstick with a yard of cloth or even confusing the yard itself (abstracted from the stick) with the cloth."
Confusing credit with money is an even worse mistake to make.
"In reality, the monetary tokens signifying credit are created by states enforcing debts, including the obligation to pay taxes."
No need to beat the same old horse. Money tokens do most certainly not signify credits. I will accept gold coins if they represent value, and are useful as a unit of exchange. If the state says to use dollars, even as they are debased, participants can, and most likely will, begin to engage in exchange via some other mechanism. Why, in Vietnam, do they now price real estate in gold, instead of dong? Gold has NO credit risk, is not a responsibility of the government, it has its own intrinsic value and acts as a unit of exchange. It does not signify credit, no matter how many times you may say it does.
"Since my record of accounts receivable essentially is money"
And no, your A/R is not essentially money. If you had to sell your A/R to a collections agency, they most certainly would not pay you full face value.
You are constantly misrepresenting the core of a commodity based standard because you, yourself, don't understand what money is, and is not. I most certainly do not believe what you say I, a believer in free-banking, and presumably a commodity based currency, believe. You employ cheap, rhetorical tricks, say they are not pedantics, and then say they are necessary to understand how markets work, while, at the same time, constantly confusing money and credit.
Martin,
"I can't meaningfully favor property and oppose coercion, so I don't bother pretending to oppose coercion absolutely."
There's a lot of room for discretion in that word "absolutely". So is there a point at which you would oppose coercion?
Of course. I oppose most coercion. I am a libertarian. What I'm not is a bullshit artist pretending to oppose all coercion. The "good guys" force is still force, even when I really agree that they're the good guys. I'm always skeptical that any armed men are the good guys, but I'm not about tell the statesmen to go home when the thief is at my door and I'm entitled forcibly to repel him but not vice versa.
I don't know, Martin. In the few discussions we've had you always seem to find a reason to support more coercion by the state. You call yourself a libertarian… I think not. Your rhetoric is difficult to decipher, but your inclination comes through loud and clear.
muirgeo writes "The main point to me is that the issues of economics are ultimately issues of political philosophy."
Ordinarily, muirgeo, you are stupid. Someime you rise to the level of being merely wrong. Today, you have exceeded your previous best effort; you are spectacularly wrong. Economists describe laws, not opinions. If you think politicians can vote on the valued of pi to make it a rational number, you are sadly muirgeo. Just as 'boycott' used to be a name, your name has become here a noun meaning 'spectacularly wrong, with fireworks'.
Truisms are true.
All money is credit insofar as it accounts for my entitlement to a good of a value comparable to a good I've surrendered without an exchange of goods previously.
I return a defective product to a store, and the store gives me a $10 credit at the store rather than a $10 Federal Reserve Note. If this store sells everything I'll ever want at market rates, this credit is equivalent to the $10 FRN. I'll happily accept these credits in exchange for other goods in lieu of $10 FRNs or $10 gold pieces for that matter. I'll prefer the $10 store credit to the $10 gold piece for that matter, because I have less use for the gold.
A worthless mortgage obligation is not negotiable. This fact is not controversial and has no bearing on the point. If the store above sells nothing anyone wants, then its credit is not money either, but that's also irrelevant.
No. You confuse "credit" with worthless mortgage securities. That's your mistake. "Credit" does not solely describe bonds sold by financial institutions. Credit is extended any time anyone exchanges current value for an entitlement to similar value later. It's "money" because it's a placeholder for something I expect to obtain later; otherwise, the word we want is "barter".
Certainly, they do.
Right. I'll also accept silver coins or silver bullion or diamonds or pearls. If I'm competent to judge the value, I'll accept comic books and baseball cards. That's called "barter". However, if I walk into WalMart or practically any other merchant in my neck of the woods with any of these things, including gold, I can't expect the cashier to accept it for anything I might want to purchase, so it ain't money 'round here. When there's a Danny's on every corner selling everything imaginable, maybe gold will be money then. I'll let you know when it happens.
If pigs fly, pig shit falls from the sky, but pigs don't fly. The problem here is that your hypotheses are false.
Presumably because prices in dong are not stable. Since I don't live in Vietnam, I wouldn't know. It is possible to price everything relative to the value of gold. This pricing convention does not equate gold with money, but it is the meaning of "gold standard". A gold standard is a fixed price of gold. It is not the identification of gold with money. If a gallon of milk of standard quality has a stable price, we may also price everything in terms of the value a gallon of milk, but this convention doesn't equate milk with money either.
Let's see how risky gold tokens might be. I'm wearing a white gold closing pin (a skydiver's charm) around my neck right now. It was a gift from my fiancee. It claims to be 14k gold.
Is the charm 14k gold? If gold has no credit risk, you must know the answer to this question. Right?
Suppose I find that the charm contains no gold at all. Someone just took a conventional stainless steel closing pin, etched "14k" into the surface and sold it to my fiancee for a nice markup. Suppose I want to recover the price of this scam from the seller. Do I call the police, hire an attorney or just fight it out with the scammer and let the stronger man win?
I nowhere ever say that your gold signifies credit. On the contrary, I say that money is credit and that your gold is not money, so I say that your gold is not credit.
I say instead that your gold is a commodity with a price, just as a gallon of grade A, 3% milk is a commodity with a price. If you give me the gold today in exchange for some token signifying your entitlement to anything of equivalent, current value in the market tomorrow, that's "currency" as well as "a credit". This token is not the gold, because it's money instead. Get it?
It can play the role of money insofar as it's negotiable, and it's more like money than your gold. Your problem here is that you deny the hypothesis that the account is negotiable.
They would pay full value as they assess value. My accounts receivable are not certain to be received, so they'd discount them for the risk, of course. Measuring the risk that my accounts receivable are really receivable is a bit more difficult than measuring the gold content of my closing pin, but the principle is the same.
If we're using gold closing pins as money, you'd want to measure the gold in my closing pin. Right? Suppose I'm very clever, and my charm is 14k gold only one millimeter deep. If you exchange the pin for something worth the pin's weight in 14k gold, how risky is your credit then?
Answer: The risk has little to do with the purity of my closing pin and much to do with the willingness of other people to accept the pin as a token of credit.
No. I'm fully aware of what a commodity based standard is. You erroneously believe that a commodity based standard identifies the commodity of standard value with money, but it doesn't. It only fixes the price (the nominal value) of the commodity. The supply of money under a gold standard may far exceed the total value of all banked gold. This was always true under every gold standard that ever existed, even when the system operated smoothly without runs.
I have no idea what you believe and don't presume to say so.
Actually, I say one of my statements is pendantic above. I nowhere say that any statement is not pedantic. Understanding that money is credit is necessary to understand the role that money plays in a market. Markets can exist without credit, if we always exchange valuable goods for valuable goods (as opposed to valuable goods for abstract tokens of value) in every transaction. That's called "barter".
Please be more specific. Precisely, what coercion have I supported? Writing "loud and clear" is not actually a loud and clear statement. We aren't speaking at a political convention here.
Once again, George – you are not compelled to drive.
Posted by: Methinks
And you are not compelled to use the public roads, treated water or the public sewer system. You could simply fly to work, catch rain on your roof top and share your kitty's litter box.
muirgeo writes "The main point to me is that the issues of economics are ultimately issues of political philosophy."
Ordinarily, muirgeo, you are stupid. Someime you rise to the level of being merely wrong. Today, you have exceeded your previous best effort; you are spectacularly wrong. Economists describe laws, not opinions. If you think politicians can vote on the valued of pi to make it a rational number, you are sadly muirgeo. Just as 'boycott' used to be a name, your name has become here a noun meaning 'spectacularly wrong, with fireworks'.
Posted by: Russ Nelson
No inconsistency at all in what I wrote. Maybe the word economies could be substituted for economics but the obvious point was that economies depend dramatically on the political systems in which the operate. This is a critical issue in discussing economies and politics but of course the fact is you're simply more interested in a chance to flame then really discuss anything of substance. Vacuousness is the noun that comes to mind.
You could simply fly to work, catch rain on your roof top and share your kitty's litter box.
I actually think that, depending on where I lived, your government would prevent me from doing all three of those things if it knew about it.
I was very happy with my privately run trash pickup, before the city compelled us all to use theirs.
Is there a law where you live that forbids transportation other than your personal gas-powered automobile, or is your analogy flawed?
"Ordinarily, muirgeo, you are stupid. Sometime you rise to the level of being merely wrong. Today, you have exceeded your previous best effort; you are spectacularly wrong." – Russ Nelson
It looked so good, I thought I'd post it again
Martin,
"Please be more specific. Precisely, what coercion have I supported?"
You have supported state coercion to penalize spending that is not directed towards state approved "investments". You have supported state coercion to force children to care for their parents. That was a few months ago. I haven't really read your money posts above critically, but I would be willing to bet that the bottom line on them is a preference for some form of state coercion. Am I wrong?
Ah, here it is…
Danny: Money is not created by laws. It is created by a free society choosing whether or not to accept this or that as a medium of exchange.
Martin: Money is a record of credit from an exchange. I give you a gallon of milk. Rather than returning something of comparable value, you return documentary evidence that I have parted with this value. I am then entitled presently to something of comparable value elsewhere in the market. You possibly obtained the entitlement similarly, but people obtain these entitlements in many different ways.
In other words, you are making the case that money is whatever the state says it is.