Cassidy on the meltdown

by Russ Roberts on November 24, 2008

in Financial Markets

John Cassidy does a nice job summarizing how we get here with a focus on Bernanke and the evolution of his view of the Fed. One of my favorite parts is when Bernanke suggests that it’s time for Congress to get involved via the bailout:

Paulson agreed. A bailout ran counter to the Bush Administration’s free-market
principles and to his own belief that reckless behavior should not be
rewarded, but he had worked on Wall Street for thirty-two years, most
recently as the C.E.O. of Goldman Sachs, and had never seen a financial
crisis of this magnitude. He had come to respect Bernanke’s judgment,
and he shared his conviction that, in an emergency, pragmatism trumps
ideology.

It almost always does.

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LowcountryJoe November 24, 2008 at 1:14 pm

I am very confused and do not know where to put this (these) long-winded question(s). So, I'll place it here in hopes that someone can provide some wisdom.

I subscribe to Milton Friedman's teaching that inflation is caused by an increase in the money supply. Greg Mankiw's blog [in reponse to correspondence with Robert Barro] shows an illustration that suggests that 'the market' is bracing for deflation, as inflation-indexed Treasuries have higher yields than do non-indexed Treasuries. The pundits are talking of inflation, too, but many time they're full of crap; seeing the 'market's' response, though, is an eye-opener.

So, isn't all this massive window-lending by the Fed and all this federal bail-out spending by the Treasury increasing the money supply? If so, why would 'the market' be anticipating deflation? If not, how is this bail-out and window-lending not increasing the money supply? Is it working to increase the money supply but that there's some kind of off-set occuring simultaneously? Was Friedman's theory wrong or did I happen to not fully understand it? What is going on here? Will someone explain?

LowcountryJoe November 24, 2008 at 1:16 pm

Correction. Should read:

The pundits are talking of deflation

Lukman November 24, 2008 at 1:46 pm

Hello,
Long time lurker, first time poster. Your blog has become daily reading for me. I am pursuing law school and your blog has served as a stepping stone for my new found interest in economics, specifically law and economics. Having spent much of my time in pre-medical studies and medical research, I found the mainstream medical community short-sighted in terms of how most medical interventions have not all too unforeseeable consequences that can create even worse problems. I now see that government dictation of economic policy, via centrally created incentives, can create profound systemic havoc. Whereas a medical mistake harms one patient, bad policy harms everyone. The stakes are so incredibly high and it's a shock to me that the cogent and prescient views expressed in this blog are not more apparent in the mainstream media. So my question to you is that what can a young person, such as myself, do? Having discovered this exciting world of knowledge, the study of law and economics would seemingly allow me to learn much more. But then what?

Thank you,
Lukman

Sam Grove November 24, 2008 at 2:14 pm

I subscribe to Milton Friedman's teaching that inflation is caused by an increase in the money supply.

That is the dictionary definition of inflation.

The deflation they seem to worry about is a drop in prices due to a drop in consumer spending.

They are afraid that the economy will slow down due to lack of consumer spending and that low prices will cause a drop in production because of lower profits.

So pursuit of stimulation through currency expansion will result in inflation later on.

They're all screwed up.

LowcountryJoe November 24, 2008 at 2:24 pm

Lukman,

Continue on your path. Make contributions to the comments section when you can. And, when you have your own practice, leave free-market and laissez-faire reading material out in your waiting room.

Welcome to the blog as a contributing personality!

LowcountryJoe November 24, 2008 at 2:29 pm

The deflation they seem to worry about is a drop in prices due to a drop in consumer spending.

They are afraid that the economy will slow down due to lack of consumer spending and that low prices will cause a drop in production because of lower profits.

Then this is just going to be short-lived to clear inventory and to see what shakes out. After the inventory is gone and it's time to source new stuff, things should be returning to the inflationary? By the way, what is the USD doing against the trade-weighted basket of currencies these days? Anyone know?

Dave November 24, 2008 at 2:57 pm

LowcountryJoe,

The total money supply is dependent on two things: the monetary base, and expansion via credit. The Fed directly influences the monetary base, typically through buying and selling government securities.

Fractional reserve banking allows banks to lend out most of its deposits. The money lent is used to create new deposits, where most of it can be lent out further, and so on. This process allows expansion of the monetary base, and accounts for most of the money supply.

Right now, we're in a credit crunch. If credit is contracting and the monetary base remains the same, the money supply will shrink, and by Friedman's logic, deflation will ensue. The Fed is trying to combat a decreasing money multiplier by expanding the monetary base. Skeptics refer to this as "pushing on a string."

Notice that what I described before about the Fed's influence on the monetary base is different than simply printing money. In theory, if the monetary base is expanded too much and credit recovers, the Fed would be able to fight the ensuing inflation by selling the government securities on its balance sheet to "soak up" the excess liquidity and reduce the monetary base. The danger this time around is that the Fed's balance sheet has become full of illiquid, lower quality assets which may hinder its ability to reign in the monetary base in the future, resulting in hyperinflation. The other fear is that the US government will take on enormous amounts of debt in fighting the current crisis and that its borrowing costs will increase in the future, in which case it will monetize the debt by simply printing money, which would also be inflationary.

That's how I understand it, anyway. I'd recommend checking out wikipedia's entries on money creation, money supply, and fractional reserve banking.

gappy November 24, 2008 at 2:57 pm

The current crisis will be studied for years to come, especially if its damage will be extensive.

From a mostly non-economic point of view, what I find interesting is how decision makers behave in conditions of extreme ignorance. There is no historical precedent that can help guide them. The Great Depression is similar in size (potentially) but not much else. In probabilistic terms, everyone put a prior probability equal to near-zero on the event of bankruptcies of two major invetment banks and the biggest world insurer, VIX at 80, etc. In these conditions, how do you update your priors and how do you inform your actions? The cynical answer would be "very poorly". In practice, I believe that people act in a peculiar risk-averse way. They are not really behaving in a risk averse fashion, e.g., to maximize utility (with a *very* concave utility), or to minimize losses (a la Prospect Theory). Instead they seem minimize the *perception* that they are risk seekers. In other words, it seems to me that there is an emergent herd behavior among decision makers. Hence the many changes of direction by Paulson. Hence the indecisiveness by McCain.

Obama is offering a technocratic answer to the problem: hire competent people (Summers, Romer, Geithner, and more to come). But this won't solve the problem. Even the angels before God must be prone to groupthink.

xxxxx November 24, 2008 at 2:58 pm

Folks,
I don't claim to be an expert on these things, but I believe that inflation occurs when the effective money supply increases more rapidly than the increase in "goods and services". Thus, if the number of widgets doubles, but the money supply increases by *only* 10%, deflation in the price of widgets will occur. This applies to the economy as a whole as well.
xxxxx

Adam November 24, 2008 at 4:31 pm

Aren't recessions mainly caused by over supply? Like having too many houses and the price drops even though the money supply increases. It seems to me that deflation is necessary in order to clear out that supply so that prices can return. If the prices are stimulated up, then the supply will remain high and people will lose jobs (can't keep people working when there's unsold inventory).

The recession can only end when the inventory is cleared out, and deflation of prices is necessary for that to happen quickly.

That's my understanding, anyway.

scott clark November 24, 2008 at 4:39 pm

Dave, in the scenario you describe, with the Fed having illiquid assets that it can't sell to reduce the monetary base, it could just curb lending by increasing reserve requirements, Loan to Value guidelines, or other capital ratios for banks and other lending institutions. I mean, if hyperinflation is on the way, fueled by a monetary base that won't contract, then they could bring on their own credit crunch, if the credit crunch were the thing leading to the deflationary pressures.

No, I suspect there is something else going on entirely. Old Hayekian saw about economics teaching people the limits of what men think they can design.

Its all the tinkering that is the problem in the first place. Pull this lever, push that button, stimulate here, shock over there.

Hmm, I'd guess that the measurement of inflation is going to be a bigger problem here too. Isn't it possible that inflation could be measured to be on the rise, but deflation could actually be the order of the day, thanks to basic statitics, measurement errors, bad estimates for the different weightings, excluding goods that turn out to be way more important than the index maker thought? Then to make a centralized, one size fits all monetary policy based on or in reaction to those measures could be way too mistaken for a healthly economy to survice.

I don't have a better idea of what to do, mind you, but I sure wish everybody would be at little more honest about what they do and don't know.

LoecountryJoe November 24, 2008 at 5:07 pm

If credit is the problem and the lenders are weary of lending funds to potential borrowers then why not entice them to do so the most effective way known — do not tax their interest/dividends as income. Instead, if it has to be taxed at all, give the tax rate on interest/dividends something comparable to long-term capital gains tax.

Greg Ransom November 24, 2008 at 5:09 pm

Does anyone know if Paulson has a personal stake in all this? Were has he invested his 1/2 billion dollars?

bbartlog November 24, 2008 at 5:37 pm

Even if Paulson's money were in a blind trust (or indeed if he had no investments at all), the fact that his entire social world consists of Wall Street types means that his incentives are distorted. Easy for him to be in favor of the free market while he and his buddies were making hand over fist, but once it looked like some of them might suffer catastrophic losses suddenly it became clear that his ideology was just a convenience.

Crusader November 24, 2008 at 5:51 pm

Nothing can clear out the Big 2.5's inventory. What to do with all that metal?

Anonymous November 24, 2008 at 6:29 pm

Nothing can clear out the Big 2.5's inventory. What to do with all that metal?

At some price it will clear out, even if it's for scrap. If they've over built to that point, then it's best to let them close down and use all those resources elsewhere.

vidyohs November 24, 2008 at 6:38 pm

LCJ,

Re: your question about the USD Vs others.

I trade currencies at FXCM. At the beginning of the so-called housing crisis the it took $1.35 to buy one EURO, after the shit hit the fan and all the money was thrown around it had dropped to $1.25 to buy one EURO. That ratio has been drifting up bit by bit till today it takes $1.29 to buy one EURO.

Basically the USD has followed similar but not exact paths against other currencies.

It surprised me as I had mistakenly thought that as our troubles roiled the markets the USD would drop in value, instead it gained value.

Go to:
http://www.fxcm.com/open-free-100k.jsp

you can open a free demo account and watch it yourself. Demo accts last one month and you can open a new one every month endlessly.

LowcountryJoe November 24, 2008 at 6:53 pm

It surprised me as I had mistakenly thought that as our troubles roiled the markets the USD would drop in value, instead it gained value.

Perhaps other central banks are causing some weird and counterintuitive stuff to happen.

Acton. November 24, 2008 at 7:19 pm

Some of the deflation may also be coming from the massive deleveraging that investment banks are doing atm.

scott clark November 24, 2008 at 8:49 pm

re: rise in USD value vs. foreign currency, think "tallest pygmy"

Marcus November 25, 2008 at 3:46 am

From what I've seen looking at the CPI, it appears to be the falling price of oil and gas that are causing 'deflation'.

I put 'deflation' in quotes because personally, I think the terms inflation and deflation should only refer to the supply and demand of money.

I think prices rising or falling in response to prices of important resources like oil are simply prices doing their job transmitting information on the scarcity of resources. It's a perfectly healthy thing for prices to do.

Martin Brock November 25, 2008 at 8:10 am

Inflation is a general rise in prices, essentially all prices rising in tandem. Oil is a critical commodity affecting many other prices, but the changing price of oil alone doesn't signal inflation or deflation. Inflation involves increasing, nominal entitlements to consume with correspondingly increased production, so a large increase in retirement seems likely to stimulate inflation.

vidyohs November 25, 2008 at 9:10 am

In competitive markets prices rise in reaction to other stimulus, they don't just rise.

A raise in price is not inflation, it is a raise in price.

An increase in the number of fiat dollars in circulation is inflation and inflation causes each of those fiat dollars to decrease in value thus requiring an "inflation" in the number you need to have the same value you did before the issuance of the additional fiat dollars.

A merchant realizing that each dollar is worth less has only one option to recoup his investment in the products he is selling, and that is to raise his prices. Once one merchant does, all others fall in line just like dominos.

Even street guys understand the simplicity of that.

Price raises are the symptom of inflation, increased fiat dollars in circulation is the disease.

Martin Brock November 25, 2008 at 11:53 am

A raise in price is not inflation, it is a raise in price.

An increase in a single price is not inflation. A more general rise in prices is "inflation" by definition. A rise in the money supply is not inflation, unless prices generally also rise.

An increase in the number of fiat dollars in circulation is inflation …

Money is entitlement to purchase goods. For price stability, we need as much money as required to account for our entitlement to purchase goods. An expanding supply of goods requires an expanding money supply. An expanding money supply is inflationary only if the supply of goods doesn't also rise with it. Ideally, the money supply rises as we extend credit to finance a growing supply of goods.

I ignore money velocity here for the same of simplicity.

Price raises are the symptom of inflation, increased fiat dollars in circulation is the disease.

That's absurd, really. Two hundred years ago, there were no U.S. dollars at all. Now, there are trillions. Simply creating more dollars isn't a problem. Creating too many can be a problem.

Listen to Selgin on Free Banking at EconTalk. He'll explain to you that money is credit not a commodity, even under a gold standard without any central bank. You'll never believe the explanation coming from me.

Anonymous November 25, 2008 at 12:07 pm

Causes of Inflation

In a nutshell, inflation occurs—that is, the purchasing power of the dollar shrinks—to the extent that the nominal supply of dollars grows faster than the real demand to hold dollars.

http://www.econlib.org/library/Enc/Inflation.html

Martin Brock November 25, 2008 at 12:28 pm

… the real demand to hold dollars.

This statement isn't very meaningful. A "dollar" is unit of account, so I hardly know what it means to "hold dollars". We can hold dollar denominated securities like Treasury notes or mortgage backed securities from FNMA or a CD or other bank deposit, but holding a dollar isn't very useful.

People typically don't hold dollars. We spend dollars. Spending dollars is only an abstraction of real exchange. I exchange labor, or fruits of my labor, for money, and I immediately exchange the money for goods of comparable value, possibly including securities.

When I buy a "security", I'm buying a promise of entitlement to consume in the future. My money isn't "held" in this scenario. It's credited to someone else for current expenditure, hopefully on profitable means of production. In the case of Treasury securities I purchase, the money is spent by armed men promising forcibly to seize goods for me in the future.

If I thought I could overpower these armed men selling Treasury securities, I might just cut out the middleman and purchase guns myself. Then when I want entitlement to consume in the future, I could threaten to harm producers refusing to give it to me. Since I don't expect to overpower the statesmen, I acquiesce to their monopoly of force and purchase this service from them.

Marcus November 25, 2008 at 12:55 pm

"Inflation is a general rise in prices, essentially all prices rising in tandem."

I understand that Martin. I was making a distinction.

"Oil is a critical commodity affecting many other prices, but the changing price of oil alone doesn't signal inflation or deflation."

Except, apparently, to some it has.

Look at the current concern over falling CPI. Looking at the components of the index the fall can largely be explained by falling energy prices.

Yes Martin, I understand that those falling prices in oil are largely a result of falling demand. My point is, that is prices doing what they are suppose to do. Signaling information.

It is my OPINION, that the term inflation (or deflation) should refer only to monetary causes of general price increases (or decreases).

Martin Brock November 25, 2008 at 1:31 pm

I was making a distinction.

I understand. I was reiterating your point really, but emphasizing what inflation/deflation is rather than what it isn't. The falling price of oil doesn't alarm me. The price is still twice its long term value and far above its price only three years ago. That's obviously not deflation.

I still expect global production of conventional oil to peak soon, if it hasn't peaked already, but the peak doesn't imply an unlimited price increase. We've beaten back the stratospheric price this time simply by consuming less, and I suppose we can cut our consumption far more without substantially harming our economy in the long run, even without alternatives. With alternatives, $50-60 a barrel or less, not $150/barrel, could be a new equilibrium price as far as the eye can see. I certainly hope so.

Monetary policy can be inflationary, but simply attributing inflation to easy monetary policy can be misleading.

What happens when an entire generation of people chooses simultaneously not to invest in vital real capital requiring decades to produce while "saving" simply by selling one another notes promising entitlement to consume decades in the future?

What happens when the notes start coming due but the real means of production don't exist?

What if the people selling each other promissory notes are themselves the most valuable real means of production, but each produced far fewer copies of themselves than the generating preceding them?

We have no historical precedent for what's happening now. The human population grew rapidly throughout the industrial, capitalist revolution, so we have no experience of capitalism without this growth. Now, human population growth has fallen dramatically, and the human population may soon peak and begin a decline, as has already happened in Japan.

If modern capitalism is really all about rent seeking, particularly rents imposed on labor, rather than owning the marginal product of nonhuman capital, what happens when rents peak along with the size of the labor force?

Think that's happening decades from now? No. The Japanese labor force has already peaked and is now declining. The U.S. labor force will practically peak roughly ten years from now, though it probably won't decline for many decades.

Martin Brock November 25, 2008 at 1:36 pm

But the population of rent collectors is not peaking. It grows rapidly for decades to come. While the Japanese labor force declines, the population of rent collectors doubles. In the U.S., the population of rent collectors grows rapidly while the labor force practically stops growing, but at least our labor force won't be declining.

Martin Brock November 25, 2008 at 1:47 pm

The collapse of the Soviet Union actually coincided with the peak of the Russian population, and the size of the labor force peaks before population peaks. The collapse wasn't simply demographic, but accounts of the collapse largely ignored the demographic transition and other economic fundamentals, instead emphasizing political factors almost exclusively.

Anonymous November 25, 2008 at 3:17 pm

That's because people largely haven't grasped the fundamental nature of economic system dynamics (OVER TIME).

We are diverted by accounting and dollar signs from seeing the base reality which the accounting system refers to but does not describe.

Sam Grove November 25, 2008 at 3:18 pm

Sorry, that was me. I got used to the blog software taking me to the preview screen.

vidyohs November 25, 2008 at 3:26 pm

Tsk tsk martin,

http://landru.i-link-2.net/monques/coinageact.html

The coinage act of 1792 is clear to anyone with two brain cells to rub together that the dollar was created in 1792….let's see now…1792 plus 200 would mean that by 1992 the dollar had been in existence for 200 years, now add 16 and we get 216 years the dollar has been around.

However, I see my mistake in my thinking and thanks to you, martin, I will now correct myself.

Oh, BTW, congratulations on your upcoming Nobel Prize in Economics, the one rewarded for your work in refuting Milton Freidman.

Now my mistake was in aligning myself with such a dolt as Freidman, and actually fooling myself into believing that I could see an exact reflection of his theories in my street dealings. What a fool I was.

I am hence forth going to come here to read your concise, succinct, clear, intelligent, rational, and brilliant writings on your economic thought.

When you get your Nobel, will you send me an autograph?

No no, wait a minute. For God's sake, vidyohs, you're writing a response to a man that can't even understand the Coinage Act of 1792, which, as you said, means he doesn't have two brain cells to rub together.

Naw, forget it martin, I think I'll stick with Freidman.

Sam Grove November 25, 2008 at 4:00 pm

So, vidyohs, you don't transact with FRNs?

Martin Brock November 25, 2008 at 4:05 pm

You already know that the Coinage Act of 1792 entitles the Mint to coin copper pennies without specifying any relationship to banked gold or silver or even the purity of the copper, and you know that pennies and half-pennies were the common currency at the time, not rounding errors as they are now, so the Coinage Act fixes the price of gold and silver in dollars, not the price of dollars in gold and silver.

You don't know much of what Milton Friedman thought about anything either. He was a monetarist, not a Rothbardian. He understood that a gold standard involves promissory notes secured by assets valued relative to gold and not simply gold warehouse receipts. He thought that both the promissory notes and the warehouse receipts could be privatized in a free money system, but he thought a free money system with a fixed gold price impractical.

You could listen to Selgin on EconTalk, but you won't, because he confronts your denial. You believe whatever it pleases you to believe, regardless of anything Milton Friedman or anyone else tells you.

vidyohs November 25, 2008 at 4:44 pm

And there is the crack of the bat, Sam drives this one ("So, vidyohs, you don't transact with FRNs?
Posted by: Sam Grove | Nov 25, 2008 4:00:06 PM") deep deep into the outfield…..vidyohs goes back back back, staring into the sun, tracking the flight, and reaching up with desperate effort snags a great big…..HUH?

vidyohs November 25, 2008 at 4:55 pm

It takes at least two brain cells to understand that this gives the exact measure of coins, including dollars, in weight and purity. Why do you have a problem, martin?

SEC. 9. And be it further enacted, That there shall be from time to time struck and coined at the said mint, coins of gold, silver, and copper, of the following denomination, values and descriptions, viz. Eagles—each to be of the value of ten dollars or units, and to contain two hundred and forty-seven grains and four eighths of a grain of pure, or two hundred and seventy grains of standard gold. Half Eagles—each to be of the value of five dollars, and to contain one hundred and twenty-three grains and six eighths of a grain of pure, or one hundred and thirty-five grains of standard gold. Quarter Eagles—each to be of the value of two dollars and a half dollar, and to contain sixty-one grains and seven eighths of a grain of pure, or sixty-seven grains and four eighths of a grain of standard gold. Dollars or Units—each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenths parts of a grain of pure, or four hundred and sixteen grains of standard silver. Half Dollars—each to be of half the value of the dollar or unit, and to contain one hundred and eighty-five grains and ten sixteenth parts of a grain of pure, or two hundred and eight grains of standard silver. Quarter Dollars—each to be of one fourth the value of the dollar or unit, and to contain ninety-two grains and thirteen sixteenth parts of a grain of pure, or one hundred and four grains of standard silver. Dismes—each to be of the value of one tenth of a dollar or unit, and to contain thirty-seven grains and two sixteenth parts of a grain of pure, or forty-one grains and three fifths parts of a grain of standard silver. Half Dismes—each to be of the value of one twentieth of a dollar, and to contain eighteen grains and nine sixteenths parts of a grain of pure, or twenty grains and four fifths parts of a grain of standard silver. Cents—each to be of the value of one hundredth part of a dollar, and to contain eleven penny-weights of copper. Half Cents—each to be of the value of half a cent, and to contain five penny-weights and a half a penny-weight of copper.
Half Eagles.
Quarter Eagles.
Dollars or Units.

Why, martin, I even see exact weights for pennies and ha'pennies, but of course a nonexact description of a copper penny would negate the exact description of a dollar…..why hell yeah! In martinworld it would. LOL, the lengths you will go to avoid admiting that you see what you see.

Your mission, should you choose to accept it, martin, is to search for that other brain cell.

Now, martin, how can you say that about Milton and me? I'll have you know that Milton told me in confidence one day that I was the best student he ever had because I could take his lessons and interpret them into action on the street…..I never debated him about pennies. Ask Milton, if you don't believe me.

Martin Brock November 25, 2008 at 6:28 pm

… this gives the exact measure of coins, including dollars, in weight and purity.

"Eagles—each to be of the value of ten dollars or units, and to contain two hundred and forty-seven grains and four eighths of a grain of pure, or two hundred and seventy grains of standard gold. … Half Dismes—each to be of the value of one twentieth of a dollar, and to contain eighteen grains and nine sixteenths parts of a grain of pure, or twenty grains and four fifths parts of a grain of standard silver. Cents—each to be of the value of one hundredth part of a dollar, and to contain eleven penny-weights of copper."

You write "purity", then you quote text that states the purity of only gold and silver, plainly omitting any purity of copper pennies and half pennies. You're playing a politicians of game of lying by omission.

Even if the text stated a purity of copper (though it clearly doesn't), copper is not a precious metal. The "dollar" is not defined in terms of the weight of precious metals. Rather, the price of gold and silver is defined in terms of "dollars", and the Mint may coin as many "dollars" in copper pennies and half pennies, of specified purity, as it likes. If you look at more recent statutes enacting gold standards, this point is very explicit.

And of course, this statute doesn't prevent anyone issuing a promissory note for a dollar's worth of gold coin without possessing a dollar's worth of gold coin. That's what a "dollar bill" is under a gold standard, you know. I guess you don't know.

Why, martin, I even see exact weights for pennies and ha'pennies, but of course a nonexact description of a copper penny would negate the exact description of a dollar…

Above you write "weight and purity". Here you write only "weight", adding "exact" to cover the omission. You should run for office.

Ask Milton, if you don't believe me.

Milton is dead, making this challenge a bit disingenuous. I quoted him, and you've simply ignored the quote. If you studied under him, that's great, but you don't demonstrate any understanding of his work here. I need more than your anecdote to take you seriously. If you can quote Milton Friedman making your point, go ahead. I've already done so.

Martin Brock November 25, 2008 at 6:30 pm

Correction: the Mint may coin as many "dollars" in copper pennies and half pennies, of unspecified purity, as it likes.

vidyohs November 25, 2008 at 7:04 pm

I love you martin, just the way a cat loves a mouse. LOL, you are a hoot.

Martin Brock November 25, 2008 at 7:27 pm

Some people are psychologically incapable of conceding a mistake.

Sam Grove November 25, 2008 at 8:01 pm

FRNs, Federal Reserve Notes.
Or perhaps you were wondering why I asked that question.

vidyohs November 25, 2008 at 8:19 pm

martin,

So my friend Milton is dead and unavailable for verification…….gee who-da thunk it?

LOL!

vidyohs November 25, 2008 at 8:21 pm

Yessss! vidyohs pulls the great big HUH from his glove and examines it….it is spherical and has no point…he holds it up and the crowd roars in agreement….no point to a shpere.

I'd be happy to see some sort of explanation of how a great big spherical HUH wound up in my glove.

vidyohs November 25, 2008 at 11:44 pm

Martin martin martin,

"Some people are psychologically incapable of conceding a mistake.
Posted by: Martin Brock | Nov 25, 2008 7:27:59 PM"

Just look at the "We are the Web" thread and you will see I did just that, not uncommon for a chap like me.

Now I did my "show & Tell", you produce one single incidence of your own admission of a mistake or misstatement in any debate with anyone on this blog over the last year.

While you're looking, keep a sharp eye out for that missing brain cell.

Martin Brock November 26, 2008 at 3:35 am

You aren't worth the time.

Marcus November 26, 2008 at 4:04 am

"What happens when an entire generation of people chooses simultaneously not to invest in vital real capital requiring decades to produce while "saving" simply by selling one another notes promising entitlement to consume decades in the future?…"
– Posted by: Martin Brock | Nov 25, 2008 1:31:07 PM

Interesting stuff Martin.

vidyohs November 26, 2008 at 8:29 am

I made the challenge knowing what the response must be, dear martin. Why would you take the time when we both know the search would be fruitless.

Now the brain cell……maybe. Even Milton tells me that nothing is an impossibility. LOL.

One day we might actually have a discussion in which you stay on point instead of dodging and twisting. I look forward to the day; but, if it happens it will be by accident because my skimming eye catches something in the volume of your posts.

The point of this whole exchange was how is my contracting with the corporate government any different than my contracting with General Motors or Walmart. And, how is it absurd that I would sacrafice my pension to see the government constrained in a libertarian manner or done away with if that is not possible.

Instead of a response to that I got employment figures from Japan. Relevant as hell, in martinworld.

Martin Brock November 26, 2008 at 9:50 am

Your contracting with the state is different, because you pretend that taxation is a terrible injustice while consuming the produce of taxpayers by writ of your state pension. The discussion of Japanese demographics is not addressed to you. If you want a mistake I've conceded, look immediately above your "hoot" in this forum, at a post addressed to you yesterday. If you want something more substantive, you can search the archives yourself.

vidyohs November 26, 2008 at 12:48 pm

Martin,

There you go, I did not contract with any state. I contracted with the corporation known as THE UNITED STATES OF AMERICA, which is a prima facie "state" to you, but no state to me.

My consideration of taxation as a terrible injustice you say is a pretense? Now how would you know that? Just more of your pompous pontification on matters which you know nothing.

My military pension is paid to me by the corporation in accordance with the will of those taxpayers, it is the corporation that consumes their production and they can stop that at anytime they want. I won't miss it at all except to acknowledge that once again the corporation would reveal itself to be a cesspool of corruption. Besides I talked with Dwight back in 59 when I first contracted and he assured me that none of the money that came to me as a result of the contract would come from people who didn't volunteer taxes.

And, a self correction (even though it is irrelevant) is not an admission of mistaken position, it is a retraction of a statement made but not yet challenged.

Since we are back on this subject, I quote from the above extract of the Coinage Act of 1792:

"Dollars or Units—each to be of the value of a Spanish milled dollar as the same is now current, and to contain three hundred and seventy-one grains and four sixteenths parts of a grain of pure, or four hundred and sixteen grains of standard silver."

Two brain cells to rub together is all it takes to see that there is no mention of pennies or copper in that description of a dollar.

BTW, just when is that Nobel Prize in economics coming your way?

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