Don't you miss Milton Friedman?!

[LaMidRighter]

As I said before, it served as the backbone of the old mercentile, imperialist system. If gold measures the wealth of a nation, then the only way to expand a nation's wealth beyond its limited resources is to take from those who don't have it. We can trade all we want and offer a fantastic idea to global consumers who will pay us their gold for our ideas. But in the end, isn't the location of the gold source the key to determining which nation becomes the natural kingpin?

All nations have some kind of resources whether they be food, cultural, mineral, etc. some nations are poor in raw materials but have other things to offer for exchange. The gold standard for currency would then dictate how much of the other resources the gold can buy allowing all countries in an exchange to meet an agreement on value. The market therefore would hold up in a dynamic sense.

What about a silver standard or a platinum standard or a diamond standard?

Im more of a hybrid standard fan myself. I think a standard can be set to allow for some fiat currency as a smaller percentage and then backed by a sum total of all held hard assets. It makes more sense than a singular medium of exchange to me anyway.

Then what happens when one nation's economy grows exponentially while the supply of gold remains stagnant? Does that automatically mean a greater inequality of wealth?

I think there's a comfortable middle ground based on the two previous points above.

 

[phattonez]

As I said before, it served as the backbone of the old mercentile, imperialist system. If gold measures the wealth of a nation, then the only way to expand a nation's wealth beyond its limited resources is to take from those who don't have it. We can trade all we want and offer a fantastic idea to global consumers who will pay us their gold for our ideas. But in the end, isn't the location of the gold source the key to determining which nation becomes the natural kingpin?

Wealth does not consist in money supply. You don't grow richer by printing more money. In the same manner, you don't stagnate an economy by failing to print more money.

What about a silver standard or a platinum standard or a diamond standard?

Sure why not. I'm talking about theory, not practically implementing such a system, so it really doesn't matter to me what you choose to back it as long as it is solid.

Then what happens when one nation's economy grows exponentially while the supply of gold remains stagnant? Does that automatically mean a greater inequality of wealth?

Think of the other scenario. You print money, then who grows richer? Only the people who get the money first at the expense of everyone else who experiences the inflation but doesn't get any of those extra bills.

In the scenario, the central bank prints bills. One person gets all of those bills, then he spends them at the old prices. Then someone else spends them at the old prices. It goes on and on until prices change to reflect the increase in the money supply. The people who got the money first benefit and everyone else suffers because the bills that they had are now worth less.

 

[Mensch]

Wealth does not consist in money supply. You don't grow richer by printing more money. In the same manner, you don't stagnate an economy by failing to print more money.



Sure why not. I'm talking about theory, not practically implementing such a system, so it really doesn't matter to me what you choose to back it as long as it is solid.



Think of the other scenario. You print money, then who grows richer? Only the people who get the money first at the expense of everyone else who experiences the inflation but doesn't get any of those extra bills.

In the scenario, the central bank prints bills. One person gets all of those bills, then he spends them at the old prices. Then someone else spends them at the old prices. It goes on and on until prices change to reflect the increase in the money supply. The people who got the money first benefit and everyone else suffers because the bills that they had are now worth less.

You've made great points, but what about the issue of mercantilism?

 

[phattonez]

You've made great points, but what about the issue of mercantilism?

I didn't get the point of it, to be honest. Maybe if you could elaborate some more on it.

 

[justabubba]

the point made was that the supply of gold is static while economies are (normally) expanding
to which you insisted

If you can change the exchange ratio then you do not have a true gold standard. That would be no different than fiat currency. Furthermore, gold is very stable. What isn't stable is what you compare the value of gold to, such as the dollar and other currencies.



No one has proved that you need an expanding money suppy for an economy to grow.

let's imagine a unexpanded money supply
that fixed supply is exactly one dollar ($1)

explain to us how that fixed money supply is adequate for an expanding economy

 

[Technocratic]

If you can change the exchange ratio then you do not have a true gold standard.

What do you mean it's not a "true" gold standard? It's currency backed by gold. There never has been a specie system that has some absolute value. They have all had an arbitrary ratio that can ultimately be changed. Therefore, advocating we back money with gold doesn't fix anything. In the past, as it would be in the future, the ratio would just be altered, and thus any potential stability negated anyway. That happened during the reign of constantine and diocletian when they used metals. It happened in the 19th century during the Populist era, and it happened relatively recently.

Nowhere is there any "metal backed" currency that was actaully static. It would still be a "gold standard" because you are backing the currency with x ratio of gold to dollars.

That would be no different than fiat currency. Furthermore, gold is very stable. What isn't stable is what you compare the value of gold to, such as the dollar and other currencies.

What do you mean by "stable," because the price of gold fluctuates, and therefore, isn't actually stable. It goes up and down depending on finds, investment, usage, etc. It's only relatively stable long-term.

No one has proved that you need an expanding money suppy for an economy to grow.

So, you really believe that the money supply can remain identical, regardless of the size of the economy or growth in population and the number of entities making transactions?
That any size economy can continue to funcion with no change in the supply of money?

Well, that's awesome, if you want a huge currency shortage and not enough to facilitate business.

The only alternative is to practice a debt-credit economy, which said system would devolve into anyway.

Fixing the currency at some arbtrary amount of metal your government can personally accumulate is both impractical and naive because it will be ignored whenever it's necessary, as it was in the past when the arbitrary amount of gold was too small for economic needs. The fact that every system that ever tried it couldn't possibly maintain it without altering the ratio or dropping it is evidence of the impracticality of the gold standard. The bigger the economy got, the less useful it became.

 

[PeteEU]

Here we are, a flashback to 1979 when Friedman was interviewed by Phil Donahue.

I challenge any critic to actually watch the full program before responding with their critical analysis.

Samsmart: you might especially like what he says towards the end of part one in regards to consumer safety and auto safety. We never finished that debate.

No, he was part of the reason the US is in the ****hole it is at the moment. His theories were in part embraced during the 1980s and 1990s and 2000s and that lead to the melt down.

 

[phattonez]

the point made was that the supply of gold is static while economies are (normally) expanding
to which you insisted


let's imagine a unexpanded money supply
that fixed supply is exactly one dollar ($1)

explain to us how that fixed money supply is adequate for an expanding economy

Well, I'll wait for you to mention any problem with that scenario before I decide to respond to it.

 

[phattonez]

What do you mean it's not a "true" gold standard? It's currency backed by gold. There never has been a specie system that has some absolute value. They have all had an arbitrary ratio that can ultimately be changed. Therefore, advocating we back money with gold doesn't fix anything. In the past, as it would be in the future, the ratio would just be altered, and thus any potential stability negated anyway. That happened during the reign of constantine and diocletian when they used metals. It happened in the 19th century during the Populist era, and it happened relatively recently.

Nowhere is there any "metal backed" currency that was actaully static. It would still be a "gold standard" because you are backing the currency with x ratio of gold to dollars.

If you back the currency with a hard currency but then just change the exchange ratio at your will then it is exactly the same as a fiat currency (and so is a fiat currency). With a true gold standard you do not have that ability to just change the exchange ratio at will.

What do you mean by "stable," because the price of gold fluctuates, and therefore, isn't actually stable. It goes up and down depending on finds, investment, usage, etc. It's only relatively stable long-term.

Of course the price of gold fluctuates, when compared to the dollar and other fiat currencies. Those things are manipulated like nothing else. Gold is much more stable in this regard, it is much harder to change the supply of it.

So, you really believe that the money supply can remain identical, regardless of the size of the economy or growth in population and the number of entities making transactions?
That any size economy can continue to funcion with no change in the supply of money?

Yes, though at some point you may need to start using smaller denominations of money as things become cheaper and cheaper.

Well, that's awesome, if you want a huge currency shortage and not enough to facilitate business.

Prove that there would "not [be] enough [money] to facilitate business." I want to know your thoughts on this claimed effect.

Fixing the currency at some arbtrary amount of metal your government can personally accumulate is both impractical and naive because it will be ignored whenever it's necessary, as it was in the past when the arbitrary amount of gold was too small for economic needs. The fact that every system that ever tried it couldn't possibly maintain it without altering the ratio or dropping it is evidence of the impracticality of the gold standard. The bigger the economy got, the less useful it became.

So becuase the currency was always changed, that means it always should have been changed? That is the naive theory. This argument as presented is worthless. I'll wait for you to try to prove that an expanding currency is needed in theory.

 

[justabubba]

Well, I'll wait for you to mention any problem with that scenario before I decide to respond to it.

as i see it, that one dollar total money supply - even tho fixed - would be inadequate for today's economy to function

so, explain how that low, fixed money supply (of $1) is not a hamper to an expanding economy

 

[hazlnut]

You seem to be a little bit more economically inclined than I am, but I'm trying my best. He argued for a negative income tax on top of his existing flat tax proposal and the elimination of all government entitlement programs. It's not like it was just the negative income tax. As for monetarism, why is it such a horrid idea?

We can't all be perfect nor can we all be purists. Milton Friedman popularized libertarian economic thinking far greater than the bozo Stossel or David Nolan. I thought he had MANY great ideas, but you seem very stuck on the one aspect of monetarism. What about the rest of his proposals?

Do you think he had any bad ideas?

He's pre-1950's work was his best.

 

[Kushinator]

Revolutionary economist, master statistician, and one of the pillars of the "pro freedom" movement. Probably my favorite economist of all time (but Will Sharpe is a close second).

Monetarism, in the general sense, is dead. Yet aspects of this school of thought are still present (some would refer to them as dressed up Keynesian ideas) such as quantitative easing and capital injections into potentially illiquid financial systems.

Current Fed chairman Ben Bernanke follows a new monetarist/neoclassical approach of which much is attributed to the works of Friedman.

 

[Kushinator]

What do you mean it's not a "true" gold standard? It's currency backed by gold. There never has been a specie system that has some absolute value. They have all had an arbitrary ratio that can ultimately be changed. Therefore, advocating we back money with gold doesn't fix anything. In the past, as it would be in the future, the ratio would just be altered, and thus any potential stability negated anyway. That happened during the reign of constantine and diocletian when they used metals. It happened in the 19th century during the Populist era, and it happened relatively recently.

Nowhere is there any "metal backed" currency that was actaully static. It would still be a "gold standard" because you are backing the currency with x ratio of gold to dollars.



What do you mean by "stable," because the price of gold fluctuates, and therefore, isn't actually stable. It goes up and down depending on finds, investment, usage, etc. It's only relatively stable long-term.




So, you really believe that the money supply can remain identical, regardless of the size of the economy or growth in population and the number of entities making transactions?
That any size economy can continue to funcion with no change in the supply of money?

Well, that's awesome, if you want a huge currency shortage and not enough to facilitate business.

The only alternative is to practice a debt-credit economy, which said system would devolve into anyway.

Fixing the currency at some arbitrary amount of metal your government can personally accumulate is both impractical and naive because it will be ignored whenever it's necessary, as it was in the past when the arbitrary amount of gold was too small for economic needs. The fact that every system that ever tried it couldn't possibly maintain it without altering the ratio or dropping it is evidence of the impracticality of the gold standard. The bigger the economy got, the less useful it became.

This is an often overlooked aspect of any "pegged" monetary system. Theoretically, a gold back currency can exist with only an ounce(or gram) of gold; as you stated previously, the exchange ratio is necessarily flexible.

 

[phattonez]

as i see it, that one dollar total money supply - even tho fixed - would be inadequate for today's economy to function

so, explain how that low, fixed money supply (of $1) is not a hamper to an expanding economy

You're not stating the case. You're simply stating a scenario yet not saying what exactly is wrong with it. I can't answer until you state clearly what the problems are. You can't go from not enough money so the economy won't function. The conclusion doesn't logically follow from the premise. So please, elaborate further.

 

[phattonez]

Revolutionary economist, master statistician, and one of the pillars of the "pro freedom" movement. Probably my favorite economist of all time (but Will Sharpe is a close second).

Monetarism, in the general sense, is dead. Yet aspects of this school of thought are still present (some would refer to them as dressed up Keynesian ideas) such as quantitative easing and capital injections into potentially illiquid financial systems.

Current Fed chairman Ben Bernanke follows a new monetarist/neoclassical approach of which much is attributed to the works of Friedman.

Isn't there pretty much a consensus among most economists to following this trend of econominc thought?

 

[phattonez]

"You know, it's a mystery as to why people think Roosevelt's policies pulled us out of the Depression. The problem was that you had unemployed machines and unemployed people. How do you get them together by forming industrial cartels and keeping prices and wages up?"

I think I rather like that quote.

 

[phattonez]

This is an often overlooked aspect of any "pegged" monetary system. Theoretically, a gold back currency can exist with only an ounce(or gram) of gold; as you stated previously, the exchange ratio is necessarily flexible.

If the exchange ratio is flexible and determined by the government, then how is it any different that a fiat currency system?

 

[Mensch]

I didn't get the point of it, to be honest. Maybe if you could elaborate some more on it.

From Wikipedia:

Mercantilism is an economic theory, thought to be a form of economic nationalism,[1] that holds that the prosperity of a nation is dependent upon its supply of capital, and that the global volume of international trade is "unchangeable". Economic assets (or capital) are represented by bullion (gold, silver, and trade value) held by the state, which is best increased through a positive balance of trade with other nations (exports minus imports).

The theory assumes that wealth and monetary assets are identical. Mercantilism suggests that the ruling government should advance these goals by playing a protectionist role in the economy by encouraging exports and discouraging imports, notably through the use of subsidies and tariffs respectively.[2] The theory dominated Western European economic policies from the 16th to the late-18th century.[1]

Is it a sort of barter system that you're ultimately supporting?

 

[justabubba]

Well, I'll wait for you to mention any problem with that scenario before I decide to respond to it.

ok
the inelastic monetary supply (of but $1) would be inadequate to meet the needs of a vast, expanding economy
now, you tell us why a fixed monetary supply of $1 would be adequate in today's economy

 

[phattonez]

Is it a sort of barter system that you're ultimately supporting?

No, I'm just supporting a reliable currency. Mercantilism is wrong becuase it doesn't realize that trade is mutually beneficial.

 

[phattonez]

ok
the inelastic monetary supply (of but $1) would be inadequate to meet the needs of a vast, expanding economy
now, you tell us why a fixed monetary supply of $1 would be adequate in today's economy

Why is it not enough to meet the needs of an expanding economy?! State the problems, don't just say that it is a problem.

It's like telling me that the sky is blue, and that this isn't good, and that I have to defend why blue being the color of the sky is not a bad thing. If you haven't stated why it's a bad thing, then what exactly do I have to defend against?

 

[justabubba]

Why is it not enough to meet the needs of an expanding economy?! State the problems, don't just say that it is a problem.

It's like telling me that the sky is blue, and that this isn't good, and that I have to defend why blue being the color of the sky is not a bad thing. If you haven't stated why it's a bad thing, then what exactly do I have to defend against?

your position is that a fixed money supply of $1 would be adequate for today's economy
i don't view that as being adequate
an elastic money supply is required for an elastic economy. you insisted a fixed amount of currency would be more appropriate instead
but go ahead and explain how $1 would be adequate (fixed) currency in circulation to allow our present economy to operate

 

[phattonez]

This is just a back and forth of nothing. Tell me specific problems associated with your scenario. Go ahead, list examples, make a theoretical argument, DO ANYTHING! Don't just say it's a problem. Say WHY it is a problem.

 

[justabubba]

If you can change the exchange ratio then you do not have a true gold standard. That would be no different than fiat currency. Furthermore, gold is very stable. What isn't stable is what you compare the value of gold to, such as the dollar and other currencies.



No one has proved that you need an expanding money suppy for an economy to grow.

i have given you a scenario where a non-expanding, fixed money supply retards an economic expansion
you have chosen to duck the issue
so tell us how the economy could still grow with the example of an undersized money supply which consists of a fixed amount of $1

 

[phattonez]

You have given me no scenario! But finally I can ask a question so hopefully we can get somewhere. Tell me now, how would a fixed money supply retard economic expansion?