Spending Other People's Money

by Don Boudreaux on June 6, 2009

in Stimulus

Another gem from Reason.tv.

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Gil June 6, 2009 at 8:17 am

This reminds of those who try to talk of 'fiat' money. They go in for the doom&gloom of "did you know your money is a collection 'I.O.U.'?" This is false. What can make a piece of paper quite valuable is that it is a contract or an I.O.U. of some sort. Heck! A handwritten I.O.U. can even hold up in court! True 'fiat' money that is no better than couterfeit money is that the notes represent nothing. Since 'fiat' means 'decree', then fiat money is money isn't even an I.O.U. but a piece of paper that certain someone says you will use this as your currency through the backing of force.

SaulOhio June 6, 2009 at 9:49 am

Gil: You are confusing. Are you trying to say that our money only has value because the government says so, so it is fiat money? Or not? Or what?

It sounds like you are asserting some idea false, then presenting the very argument that people use to prove it true as if it proves it false.

I was tempted to put as many question marks in this comment as there were on that guy's suit.

True_Liberal June 6, 2009 at 1:30 pm

But a $1.00 FR note does not state what that $1.00 is worth – and a 2009 dollar is NOT the same as a 1950 dollar, now is it?

And what will a 2020 dollar be worth? Probably not worth the paper it's printed on!

colson June 6, 2009 at 1:56 pm

True liberal: That's why you just print a bigger face value on the bill – it'll always be worth more than the paper it is printed on. ;)

Cheers June 6, 2009 at 4:41 pm

Speaking of spending other people's money, I had to share this.

I just took a peek at Krugman's blog:

He asserts the link between a decrease in private borrowing and an increase in public borrowing (although he explains it in terms of correlation without causation). Despite the mirror image of the graph, there is no discussion of causation, and despite this obvious high correlation in borrowing and saving, there is no possibility of it occurring with regards to spending and stimulus.

Someone please tell me I'm wrong or misguided. Seriously. This is depressing me.

Gil June 6, 2009 at 9:03 pm

Golly SaulOhio. Isn't that what most people say when they mean 'fiat' money? It's not valuable because the market chose it but the government decreed by fiat that it is valuable through legal tender?

vikingvista June 6, 2009 at 9:05 pm

"Someone please tell me I'm wrong or misguided. Seriously. This is depressing me."

I don't see why the graph should be surprising, or explanatory of anything. If the government crowds out private investment, then you'd see that correlation with government leading. If the government has a fiscal policy of deliberately borrowing when private investment is down (the usual response to recessions), then you'd see that correlation with private borrowing behavior leading.

The interesting explanations would be the ones explaining those periods where the negative correlation does not hold.

vidyohs June 6, 2009 at 10:20 pm

Well shucks, can't get the link to open, not even by going to youtube.com itself.

seanooski June 7, 2009 at 7:55 am

Yeah, it's a funny video, but this guy has been making his living by encouraging people to go to the government trough for years and years. I find him a little disingenuous now complaining that the government is giving away too much money. Since when did he have his change of heart?

Martin Brock June 7, 2009 at 10:26 am

Since when did he have his change of heart?

What makes you think he's had a change of heart?

vikingvista June 7, 2009 at 2:53 pm

"Since when did he have his change of heart?"

Are you sure it's the same guy, or just a look-a-like?

Anyway, it is not hypocrisy, just cynicism. I too want people to take maximum legal advantage of wrong-headed government programs. (1) If you're a taxpayer, you need to do what you can to recover your stolen loot. (2) Bankrupting these programs may be the only way to end the madness. The latter is a long term goal, but we may get there sooner than you think.

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